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Why Are Cannabis Merchant Fees 4–7% for Dispensaries?
Cannabis dispensaries often pay 4–7% in merchant processing fees because federal Schedule I status classifies the industry as high-risk. Sponsor banks, compliance costs, and chargeback exposure increase rates.
What This Page Covers
- Why cannabis is classified as high-risk
- How sponsor banks affect processing fees
- Why fees are higher than standard retail
- How chargebacks impact rates
Why Cannabis Is Classified as High-Risk
Cannabis remains a Schedule I controlled substance under federal law.
Because of this:
- Banks must manage federal enforcement exposure
- Card networks apply enhanced monitoring
- Merchant accounts are categorized as high-risk
High-risk classification increases underwriting requirements and processing costs.
How Sponsor Banks Increase Costs
Most cannabis transactions flow through a sponsor bank.
Structure:
Retailer → Processor → Sponsor Bank → Card Network
The sponsor bank:
- Reviews compliance
- Monitors transactions
- Files required federal reports
Each layer adds cost.
Why 4–7% Is Common
Standard retail industries typically pay:
1.5%–3%
Cannabis businesses often pay:
4%–7% or more
Example:
Monthly volume: $100,000
At 2.5% = $2,500
At 6% = $6,000
Annual difference: $42,000
The increase reflects regulatory risk, not transaction volume.
How Chargebacks Affect Your Rate
Chargebacks occur when a customer disputes a transaction.
High-risk industries face:
- Lower tolerance thresholds
- Higher reserve requirements
- Increased monitoring
Exceeding chargeback limits may lead to higher fees or account termination.
Related Pages
- Why Cannabis Businesses Struggle With Banking and Payments
- What is Cashless ATM?
- Why Can’t Dispensaries Use Credit Cards?
- Can Dispensaries Use ACH Payments?
- Why Are Cannabis Merchant Fees 4–7%?
- What Is IRS 280E and Why Does It Increase Cannabis Taxes?
- Why IRS 280 Drains Your Bank Account
