How to Launch an E-Cig Business & Set up an E-Cigarette Merchant Account

Sep 24, 2020

E-cigarettes are battery-powered gadgets that produce vaporized nicotine-free and nicotine solutions for users to inhale.

Electronic cigarettes may be far from catching up with traditional cigarettes, but they are more popular than you can imagine.

According to the PSD Center, the approximate number of grownups who vape and do electronic cigarettes will hit 55 million by 2021.

Starting an e-cig business requires preparation and dedication for many reasons. First, being a sector that involves age-restrictions, e-cigs sellers are highly regulated and go through stricter underwriting procedures.

Second, banks consider such businesses risky, so retailers must apply for a high-risk merchant account—instead of the standard account.

And lastly, you must identify the right niche, target it with the right product, and do proper marketing.

All these can mean trouble if you don’t have a clue about where to start.

Pre-considerations for Launching an E-cigarette Business

Planning is key for any aspiring entrepreneur with a soft spot for e-cigarette businesses. Consider the following when venturing into e-cigs.

  • Learn your products and plan upfront on what you intend to sell to your audience
  • Familiarize yourself with FDA regulations on advertising and selling e-cig products.
  • Go through your state tax requirements, as each state sets its own tax rules & regulations.
  • Decide on an e-commerce platform to trade your products. Try sites like Shopify, BigCommerce, etc. These platforms are your best bet because they have an integrated online payment gateway and can ease the burden of starting from scratch.
  • Plan for fraud and chargeback protection as these two can ruin your financial and reputational bottom line.

You also want to organize a friction-free customer journey that will drive customers to checkout.

E-Cigarette Merchant Account

Traditional banks consider e-cigarette businesses high-risk, which presents a new challenge to the entrepreneur.

Your best bet is a high-risk merchant account, which comes with its own set of struggles, like a higher payment processing fee, stricter regulations, and the danger of termination if you accumulate excess chargebacks or act out of compliance.

The following some high-risk factors that make e-cigarette businesses a no-go-zone for many payment processors.

  1. The e-commerce model- conducting an e-cig business online exposes a company to fraud and reverse charges.
  2. E-cig startups fail. Unlike sector giants with the resources to adapt, new businesses struggle to keep up with the industry’s ever-changing regulations. Banks are unwilling to work with newbie businesses who’ll run out of business in a few months.
  3. Dealing with age-restricted products. Until we find a standard way to verify a customer’s age, e-cig businesses remain responsible for age verification. Banks won’t process payments for age-restricted products because of the financial and reputational risk incurred when a merchant sells to an under-age buyer.

That being said, your best option lies with a high-risk payment processor who understands and onboards electronic cigarette businesses.

The best service providers will help you set up payment processing and start taking payments in a matter of days. They’ll also offer unswerving customer support anytime you need help.

Let us help you get a high risk merchant account today!

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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