Payment processing is an important part of any business, but for the vape industry, it can prove a little more complicated. There are regulatory restrictions that can make it harder to navigate as a business and lots of hidden costs that can eat into your profits if you’re not careful.

In this guide, you’ll get a better understanding of the hidden costs that come with payment processing and how to implement smart strategies that you can benefit from when it comes to your payment solutions.

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Transaction fees that cut deeper than you think

Transaction fees are often a part of payment processing. They’re composed of several smaller fees that vary depending on the card type and payment used. As well as the sales channel and security measures, these can all contribute to transaction fees that take a slice of your profits.

There can also be charges attached to these fees, from PCI compliance to chargebacks. Factors like high transaction volumes and ensuring proper data capture will help to reduce these costs where needed. 

The regulatory maze every vape merchant must navigate 

The regulations that vape merchants have to navigate often feel like a maze. There’s a multi-layered regulatory environment, including state-level bans on certain products, as well as local restrictions on sales and use.

The evolving nature of these regulations makes it a challenge for vape companies, so here are some of the regulations worth knowing about.

FDA Deeming Rule

The Food and Drug Administration oversees e-cigarettes and all of the components that come with them, which include e-liquids and devices. 

Premarket Tobacco Product Applications (PMTAs):

Manufacturers will need to obtain FDA approval for products, demonstrating their acceptability. This is a process that is a major hurdle to overcome, with many products on the market that have not gone through it.

Flavor bans and age restrictions

Many states and localities have actually banned flavored vaping products and menthol to reduce youth appeal. Therefore, you may find it difficult to get when selling it in some places. The minimum age to purchase vape products is also 21.

Taxes

Taxes are put on e-cigarette products and may therefore be subject to specific state or local taxes. Taxes can often hurt your business, but it’s good to know what tax relief you can get at the same time to minimize the damage.

Smarter strategies for sustainable payment solutions

To help ensure a sustainable payment solution that adheres to regulations, here are some smarter strategies to embrace as a business.

Evaluate all fees when choosing processing software 

When it comes to picking your e cig credit card processing platform, it’s a good idea to take into account all of the relevant fees included. Scrutinize the hidden fees and make sure you’re aware of everything before making a decision. It’s important to understand the breakdown to pick the right platform to implement as a payment processor.

It’s also a good idea to negotiate your rates, too. If your business has a high transaction volume and a low chargeback rate, then you’re more likely to be able to negotiate better rates with the processor.

Choose the right pricing model

The right pricing model is important to choose when it comes to implementing the right payment processor. Let’s take a look at what pricing models are available:

Flat-rate pricing – Pay a fixed percentage or a small fee per transaction.

Interchange-plus pricing – Pay the non-negotiable interchange fee, plus a fixed markup from the processor.

Knowing which one to choose is important, so it’s good to weigh up the pros and cons of each before deciding. With flat-rate pricing, you’ve got predictability, and it’s simplistic in nature. It’s best for small businesses with low transaction volume.

Interchange-plus pricing is more transparent and potentially cheaper for companies with higher sales volumes.

Encourage lower-cost payment methods

It’s good to look at encouraging lower-cost payment methods where possible. For example, debit cards typically have lower interchange fees than credit cards. Direct bank transfers have much lower fees, so that might be useful for large or recurring payments.

Either way, it’s good to look at encouraging the lower cost end of payment methods where you’re able to.

Running a vape business isn’t easy, especially with all the rules and regulations that are somewhat against you. However, with these tips, you’ll be able to improve your efforts within this industry and be financially better off too.