Wednesday August 1, 2018
With the 2018 summer tourism season in full force, many people are traveling to states with recreational cannabis for the first time. While common to locals or those familiar with the intricacies of purchasing legal cannabis, a typical challenge for newcomers is understanding what forms of payment are acceptable at the dispensary. While we’ve touched on dispensary tips and etiquette before, we felt it would be a good idea to go a bit further into the payment aspect so that everyone is on the same page and well-equipped for an excellent dispensary experience!
What is the Best Way to Pay at the Dispensary?
For the most reliable shopping experience, use cash. It is the only form of payment that is accepted at any dispensary and also the quickest and most convenient way to get in and out of the dispensary. In order to get a problem-free experience, the very best option is to go to an ATM at your bank and withdraw money in advance. You can be sure the funds are available and avoid any pesky fees, as well.
While most dispensaries will have an ATM available on premises, they commonly charge an additional fee on top of what banks charge for out-of-network ATMs.
Furthermore, dispensary machines are used frequently, meaning they often run out of cash. Planning ahead and using a dependable ATM will help avoid any frustration and wasted time. Many dispensaries offer order-ahead options through companies like Baker, so you’ll know the total of your purchase before you arrive and can pull out the exact amount needed.
Why is Payment an Issue?
Cannabis’ national classification as a schedule I drug means it remains illegal on a federal level. Subsequently, federally regulated commerce systems cannot interact with the cannabis market without risking indictment for money laundering. This makes banking a bit tricky for cannabis businesses – although there may be hope for marijuana banking solutions in the future. Credit and debit transactions are also federally regulated, and thus, most dispensaries operate as cash-only businesses in order to avoid conflict. So long as these businesses pay their taxes, the federal government seems fine to let them operate in cash.
When recreational cannabis emerged, the Obama administration issued a series of memos to instruct banks on how to legally work with cannabis. These strict guidelines were seen by most banks as unrealistic to implement. As a result, most refused to work with cannabis. Attorney General Jeff Sessions’ negation of the Cole memo and other cannabis guidelines earlier this year left banks with even less direction on how to interact.
Still, progress pushes on. Fourth Corner Credit Union, created with the sole intention of working with the cannabis market, won approval for a master account with the Federal Reserve this past February, enabling official transactions with banking entities. All of this leaves payment options a bit random depending on the dispensary you visit. If they are one of the rare candidates to secure a banking relationship with an amenable credit union, that unicorn might be capable of taking cash, credit and debit, all above board. Payment will most likely be indecipherable from the usual. However, this is unlikely to be what most new customers encounter. Because of this, calling ahead to learn what payments are accepted is always prudent.
Common Forms of Payment Accepted at Dispensaries
To provide a more seamless, convenient customer experience, many dispensaries now accept some form of debit, usually accompanied by a surcharge. Though appearing like a typical debit transaction, the employee is using an ATM with an augmented interface. They request a “withdrawal” of the funds for the customer and pay that cash out of the till, essentially visiting the ATM for you. This is a simplified ATM system, and most ATMs don’t accept credit cards, explaining the lack of a credit option where most would expect one. The ATM service settles with the dispensary at end of day electronically. Standard fees still apply for the “cashless” ATM.
Despite the charges, this option can still be quite appealing in a pinch. Even better, some banks and credit unions will not charge additional fees, and others will even reimburse the ATM charge. How close this comes to the usual debit experience then depends on one’s personal banking set up.
Occasionally, a dispensary accepts credit, but not debit. In these instances, the company typically has their credit account under the name of a parent company, not the dispensary proper, and is running transactions under that name to avoid rousing the suspicion of banking regulators. These transactions happen in a legally grey area, as it is possible that the business is doing all due diligence to follow the anti-money laundering laws, but unlikely. Often, the bank or credit union doing business with the dispensary catches on and closes the account. The dispensary will all of a sudden not be able to accept credit, but will continue on as a cash business until they can find another unsuspecting credit transactor.
Though no one wants to be tied to the legal fallout that could result, so far it has not affected customers. To date, no private citizen has been charged with any sort of money laundering or drug trafficking charge from using a credit card at a dispensary that wound up getting its credit line shut down.
New tech options have emerged to tackle the payment conundrum as well. Multiple financial tech companies have come up with novel ways to run credit and debit through apps on smart devices. Because cash and credit are separated, these options offer businesses better compliance methods to avoid federal charges. However, the inner workings of many of these apps have not yet been vetted by regulatory bodies, they are simply betting that the system they created will stand up to scrutiny when the time comes.
Similar to the disappearing credit accounts, sometimes these electronic payment options will disappear overnight, but as bigger and bigger tech companies step into the arena, the systems they are building look like better and safer bets. Hopefully one day all major forms of payment will be accepted at dispensaries across the board. Until then, always be sure to call ahead to make sure you know exactly which payment methods are accepted!
Do you have any tips for paying at the dispensary? Share them in the comments below!