The Square CBD Program: The Only Review You’ll Ever Need

While many payment service providers do not provide payment support for products within regulated industries, Square has emerged as a popular provider to many CBD and hemp operations in the United States. While Square doesn’t allow CBD businesses to utilize its traditional payment platform, it has a CBD-specific payment service, aptly named the Square CBD Program. As one of the only CBD-specific programs currently available from payment service providers, the Square CBD Program is a welcomed change among CBD merchants who have long been shut out of many payment processing avenues. But however welcomed it is, this program is not without its shortcomings—meaning it is an option for CBD businesses in need of payment processing, but it may not be the best option.

This guide explains said shortcomings, as well as how the Square CBD program works, its associated fees, and alternative options for CBD payment processing.

Does Square Allow CBD Sales?

Yes, Square allows the sale of CBD-derived products. However, merchants must sign up for the Square CBD Program to sell CBD products. Users of Square’s primary payment services are not permitted to sell CBD products.

Additionally, Square has a strict CBD policy, meaning there are many CBD products you cannot sell. (We explore this policy in more detail below.)

What is Square’s CBD policy?

While merchants using the Square CBD Program may sell CBD products, there are still restrictions in place. Mirroring the federal legality of CBD, the Square CBD Program allows for the sale of products with no more than 0.3% THC content. Products with more than 0.3% THC are banned from the platform.

Likewise, merchants cannot sell products to customers where CBD is illegal. Prohibited countries include China, Hong Kong, Iceland, Israel, Iran, Japan, Malaysia, Philippines, Singapore, Slovakia, United Arab Emirates, India, and Russia.

Square also has strict bans on many cannabis-related products, such as paraphernalia. Below is Square’s statement on banned CBD and CBD-related products:

Square does not allow any sellers to sell marijuana, marijuana-derived products, products that contain more than 0.3% THC, illegal drugs, and products that otherwise violate Square’s Payment Terms (e.g. kratom, kava, paraphernalia, bongs, pipes, etc.).

Lastly, Square is strict about certifying that your products meet its criteria. You must provide detailed information about your CBD products before you can begin accepting payments via the Square CBD Program. This includes a certificate of analysis (COA) confirming Delta 9-THC percentages and detailed descriptions for each product you plan to sell. Likewise, you must be careful about any medical claims as Square does not allow claims that your CBD products will cure or treat medical conditions or diseases.

Note: For information about their differences, refer to our explainer on kratom, kava, and CBD products.

What is the Square CBD Program?

There’s good for the prohibition of CBD sales via Square’s standard processing platform. Due to the ever-changing regulatory environment and increased likelihood of chargebacks, the financial exposure associated with CBD transactions pushes them into the high-risk transaction category. Whereas its standard processing platform is only suitable for processing low- and mid-risk transactions, the Square CBD Program is designed specifically for CBD merchants and the high-risk transactions they so often process.

CBD merchants can now benefit from Square’s payment services via the Square CBD Program, provided Square’s policies do not ban their products. While the Square CBD Program primarily focuses on offering payment processing services, merchants can additionally access business loans to expand their operations.

How Does Square CBD Payment Processing Work?

Square’s CBD platform functions similarly to its traditional processing platform. When you sign up for the Square CBD Program, your business will gain access to in-person and online payment processing. However, this process may take longer than the quick signup process for which Square has become known. As mentioned earlier, in order to begin selling with Square, your business needs to provide information regarding the THC content of your products.

If your goal is to sell CBD online, you can either build a website with Square or integrate Square with an existing website. One of Square’s most notable benefits is its ease of use—it’s super straightforward to set up an online store and begin selling products. On the other hand, if you operate a brick-and-mortar location, you can also use Square to process in-person payments and benefit from their range of sleek hardware choices. Options include registers, terminals, card readers, full-scale hardware kits, and more!

What’s up with Square CBD processing fees?

Because of their high-risk transaction categorization, CBD transactions typically incur high-risk processing fees. As such, Square’s CBD processing fees are higher than Square’s standard processing fees. While these fees don’t result in the best value, the company is transparent about its pricing, making it easy to predict your business’s processing costs. Square’s CBD processing fees are below:

• Online: 3.8% + $0.30
• In-Person: 3.5% + $0.10
• Keyed-In and/or Card-On-File: 4.4% + $0.15

There are no additional fees for initiation, compliance, or statements. However, the above fees are subject to change, so check Square’s website for the latest fees before you sign up.

What types of CBD products can I not sell with Square?

As mentioned previously, you can only sell products with a certificate of analysis confirming Delta 9-THC percentages. CBD products cannot exceed 0.3% THC concentration. And of course, you are prohibited from selling any illegal or heavily regulated drugs like marijuana, kava, kratom, and other paraphernalia. Additionally, Square’s strict rules regarding the sale of drug-smoking accessories do not allow merchants to sell glass pipes or bongs.

The most important element to keep in mind when partnering with Square is that you’re at the mercy of the company’s policies. You must stay up-to-date with changes and amendments to their policies; otherwise, you’ll jeopardize your account. There is a long history of Square deactivating accounts without warning.

Are Square CBD merchant accounts a good option?

Square does not offer the individual high-risk merchant accounts necessary for processing CBD transactions. Instead, the company provides payment aggregation services in which the transactions from the CBD businesses it services are funneled through the same merchant account for payment processing. Essentially, CBD businesses using Square to process payments are “sub-merchants” with much less control over their payment operations than businesses with traditional merchant accounts. This leaves merchants prone to sudden account freezes, processing limitations, and a lack of dedicated customer support.

One feature some merchants enjoy about Square is its flat-rate pricing. This pricing structure ensures you pay the same rate for all card brands, making it easier to predict your payment costs. While this fee structure makes it easy to predict prices, it’s usually more expensive than using a traditional merchant account.

While you won’t have direct access to an individual merchant account, this isn’t to say Square won’t work for your business. It’s a suitable option if you need immediate access to payment services, as there isn’t an extensive underwriting process. However, if you’re a business owner searching for a reliable payment option at the most affordable rate, partnering with a merchant services provider to obtain a high-risk merchant account is the better option.

How to Accept CBD Payments Without Square

While high-risk merchant accounts typically require additional underwriting, resulting in a longer application timeline, they offer CBD merchants the below benefits for their businesses:

• Higher Chargeback Threshold: High-risk merchant accounts allow for higher chargeback thresholds, making it easier to process chargebacks without receiving significant penalties or restrictions.
• Better Rates: While high-risk merchant accounts don’t incur flat-rate pricing like the Square CBD Program, they typically offer lower rates, allowing businesses to retain more revenue.
• Customized Service: High-risk providers understand risky industries, allowing them to provide a custom payment solution tailored to high-risk businesses.
• Lower Chances of Payment Freezes: High-risk merchant accounts are designed specifically for industries like CBD, making it less likely to receive any unwarranted account holds, limitations, or termination.
• Dedicated Support: Unlike payment aggregators, which make it hard for merchants to speak to a representative, merchant account providers offer a dedicated support team to each of their merchants, so you can access help when you most need it.

In short, traditional financial institutions have long imposed processing restrictions on CBD businesses or denied servicing these businesses altogether. However, big tech’s disruption of the payments industry seems to be following suit, leaving CBD businesses either without suitable payment processing or entirely rejected for services. If you want to avoid the pitfalls of the Square CBD program, consider opting for a CBD merchant account from a merchant service provider with experience partnering with CBD businesses.