In 2016, the FDA increased its reach within the tobacco industry to include the manufacturing, packaging, labeling, marketing, and sale of hookahs. In addition to hookahs, the shisha tobacco along with other accessories were broadly included in this new regulation. Citing health and public safety concerns, local businesses operating hookah lounges and shops have been targeted with the goal of curbing their growth. The high risk classification placed on hookah has made a once easy application for a hookah merchant account much more difficult.
Finding a payment processor willing to accept an online hookah tobacco merchant account can be a long and arduous task. While many payment processors are able to work with retail hookah businesses, most are unable to provide the needed services of e commerce businesses. Partnering with Allied Payments allows merchants in various tobacco industries, including hookah, to process credit cards online without obstacles.
What is a Hookah Merchant Account?
A merchant account is a type of bank account that is set up through a bank that has the ability to facilitate the authorization and settlement of both credit card and debit card transactions. These banks, known as acquiring banks, are part of the Visa, MasterCard, American Express, Discover, JCB and/or CUP payment card networks. Merchant accounts allow businesses to connect their retail credit card terminal, online e commerce store or both.
Online merchants in the hookah industry need additional software to securely process transactions. Using a payment gateway, merchants are able to connect their website’s shopping cart to the payment network and process authorizations. Most merchant services companies provide merchants with a payment gateway after their account’s approval. We integrate with; WooCommerce, Shopify, BigCommerce, Ecwid, LimeLight, Magento, Opencart and Prestashop to name a few.
Payment authorizations through the card networks take only a few seconds to be completed. Online transactions take about the same amount of time to authorize as retail location sales. Most merchants will receive their funds within 1-2 business days of authorizing the customer’s card.
The costs of accepting a credit card or debit card payment are determined based on a percentage of the sale price plus additional transaction fees. These fees will vary between payment processors, but they are negotiable if the merchant asks.
Consequently, it costs more for merchants to accept credit and debit cards, accepting electronic payments is a necessity. As more customers prefer electronic payments and this remains the primarily online payment method, accepting credit cards is a must.
Advantages to Hookah Payment Processing
Partnering with a payment processor that understands the hookah industry will help merchants remain compliant with financial and government regulations. Newly required federal guidelines along with changing local legislation continue to make the hookah industry a difficult industry for merchants. Knowing how to properly navigate through these obstacles can save merchants time and money.
Having a merchant account provides businesses a better means to operate. These accounts integrate directly to the acquiring bank and offer merchants increased functionality, unlike other payment services. These benefits include higher volume thresholds, faster settlements and higher percentages of authorization approvals. Other types of payment services can be fast to approve, but restrictive once the sales begin.
Payment processors that specialize in hookah businesses can also offer merchants the opportunity to expand their business. Many customers will want to buy shisha tobacco online, but some payment services providers are unable to allow these sales. Selling tobacco online is only possible with by working with a specialized payment processor.
Finally, a merchant account also allows the merchant the ability to use a comprehensive payment gateway service. A secure, PCI Compliant gateway with complete reporting and transaction management tools can help all merchants run their businesses. The gateways of sponsored payment services are generally lacking the tools to help grow businesses.
While the hookah industry continues to be classified as high risk, merchants need to work with an experienced payment processor. Working with a payment processor familiar with the industry can help merchants find reliable and affordable services. Providing more services and feature than other processors, Allied Payments continues to grow in the industry.
Pricing Structure for Hookah Merchant Accounts
Merchant accounts are set up using one of the few available pricing structures, depending on the merchant and the payment services company. The importance of merchants to understand the differences in payment structures can help businesses reduce overhead. Most merchant accounts today operate with one of two different structures; tiered or cost plus.
The tiered pricing structure establishes between 3 to 6 different levels where transactions are placed, or “qualify” for. Once the most commonly used system, the high costs of this model lead to its fall from grace. The growth of debit card usage and the excessive fees for tiered sales made way for cheaper alternatives.
The payment structure that has emerged as the most commonly used is the cost-plus pricing model. By attaching a set fee on top of every transaction, merchants always know fee involved. By preventing discrepancies based on card types and transactions factors, merchants overall save money with this honest pricing structure.
One final pricing system that is beginning to slowly gain traction is the flat fee payment processor. Some merchants like knowing that every transaction is the same price, regardless of card type. While it’s simplicity is attractive, the structure is extremely expensive to unassuming businesses. Excessive fees charged on debit card transactions cost merchants a great deal in unnecessary overhead.
Why are Hookahs and Glass Pipes High Risk?
Since the FDA increased their regulations on hookahs and hookah tobacco, many payment processors changed their underwriting guidelines. These changes have been resulting in many payment services companies ceasing to accept new merchants. In some cases, these payment processors have decided to remove their existing merchants completely from their books.
As payment processors try to become less risk-averse, the types of merchants they work with becomes narrower. Their view remains that the risk of fines and other government penalties is greater than remaining in the industry. As more and more processors make these decisions, the choices for medium to high-risk merchants dwindles.
Partnering with an experienced glass pipe merchant services company can provide businesses with low cost, reliable merchant accounts. Though many merchant services companies claim to provide high-risk merchant accounts, most can not. At Allied Payments, our goal has been to continue operating as an affordable hookah and glass pipe payment processor.
Start Hookah Credit Card Processing with Allied Payments
At Allied Payments, we have become a leader in the hookah industry by providing payment processing to hookah retailers and distributors. Offering online hookah credit card processing and payment gateway services is one of our core industries. With over 30 years of payment processing experience, our team can help most merchants.
Taking advantage of our fast and free application process allows a merchant to start processing credit card transactions quickly. Combined with our low-cost rate structure, hookah businesses throughout the USA are saving money with Allied Payments.
In addition to low fees, the services available to merchants are helping them grown their businesses. By providing merchants with a payment gateway capable of integrating into 100+ shopping carts, set up is a snap. Reporting and transactions management is fast and complete using our PCI Compliant payment gateway system.
Hookah merchants in need of an online merchant account or online hookah credit card processing services can contact a payment specialist. Our helpful representatives will be happy to assist merchants with all of their needs and to help get businesses processing credit cards online.
Frequently Asked Questions (FAQ)
What is a hookah merchant account?
A hookah merchant account is a specialized type of high-risk payment processing account that allows businesses selling hookah products, accessories, or related items to accept credit card and debit card payments both online and in-store.
Why is the hookah industry considered high-risk for payment processing?
Payment processors often classify hookah and tobacco-related businesses as high-risk due to regulatory scrutiny, age-restricted products, and potential chargebacks. This means traditional banks and processors may deny service, requiring specialized high-risk merchant account providers.
How do I get approved for a hookah merchant account?
To get approved, you’ll need to submit a detailed application with business documentation, such as a valid government-issued ID, a business license, a voided check or bank letter, and a detailed description of your products and services. Allied Payments helps streamline this process and improve your approval chances.
Can I get a hookah merchant account if I sell online only?
Yes. Whether you run a brick-and-mortar store or an eCommerce website, you can apply for a hookah merchant account. Allied Payments offers tailored solutions for online-only businesses selling hookah products.
Are flavored tobacco and shisha products eligible for processing?
Yes, many flavored tobacco and shisha products are eligible for processing under a hookah merchant account, but approval depends on state laws and the acquiring bank’s guidelines. Our experts help ensure your products meet compliance standards.
What types of businesses qualify for hookah merchant services?
We work with a wide range of businesses, including hookah lounges, smoke shops, vape stores, online retailers of shisha and accessories, and wholesalers. If your business involves legal hookah-related products, we can help.
What payment methods can I accept with a hookah merchant account?
With a hookah merchant account from Allied Payments, you can accept Visa, MasterCard, American Express, Discover, ACH payments, and even mobile wallets, depending on your business setup.
How long does it take to get a hookah merchant account approved?
Approval typically takes 24 to 72 hours after submitting a complete application. We work closely with high-risk banks to ensure a fast, smooth approval process.
Will I need to meet any age verification requirements?
Yes. If you’re selling age-restricted products like hookah and tobacco online, you must implement proper age verification tools to remain compliant with federal and state regulations.
Why should I choose Allied Payments for my hookah merchant account?
Allied Payments specializes in high-risk industries and offers customized, secure, and scalable merchant services. We provide competitive rates, fast approvals, and ongoing support to help your hookah business grow while staying compliant.
They’re a well-run, trustworthy company, and every time I’ve reached out with a question, they’ve been thorough and thoughtful in their responses. You can tell they truly care about supporting their clients.
Our business is often considered “high-risk” by many processors, so finding the right partner can be challenging. These guys made the whole experience smooth, and I feel very confident working with them.
If you’re a business owner looking for a solid, reliable merchant services provider—especially if your needs are a bit more specialized. I highly recommend them.
Thank you Charles
