Why You Can’t Always Buy Marijuana With A Credit Card

Lindsay Konsko
By Lindsay Konsko 

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The legal status of marijuana in many states and cities has shifted dramatically since this article was published in 2014. We're updating this article to reflect policy changes in regard to marijuana and how they affect consumers' ability to pay for it with a credit card.

Just a few years ago, buying and selling marijuana was an activity that took place only in the underground economy. But with the legalization of recreational marijuana in Colorado and Washington earlier this year, this formerly sketchy business is now being conducted out in the open.

Transparency is likely a good thing, but it has brought up some important legal and financial questions. For example, can a credit card be used to purchase marijuana? Technically, the answer to this question is no, but the rules are starting to change.

If you have questions about buying weed with a credit card, take a look at the information below.

A complicated industry leads to complicated rules

The first step in understanding the ins and outs of buying weed with a credit card is breaking down the way a transaction made with plastic actually happens.

Whenever you swipe your credit or debit card, the purchase is processed through a payment network owned by Visa, MasterCard or American Express. The processor then communicates with the bank that issued the card (such as Citi or Capital One) to send the funds for the purchase to the merchant. The issuer then bills you for the transaction on your credit card statement, or as a deduction from your bank account if you’re using a debit card.

According to the current rules of the major credit card processors, purchasing illegal substances (which, under federal law, marijuana still is) using their networks isn’t allowed. This means that it’s technically not permitted to use a credit or debit card to purchase marijuana, even if the bank that’s actually paying the merchant for the transaction agrees to it.

The rules versus the new reality

For years, the rules issued by the major credit card processors went unchallenged. It was obvious to people dealing in illegal substances that their business was cash only.

However, the legalization of recreational marijuana has muddied the waters a bit. When Colorado initially passed the law that made non-medicinal marijuana legal, the credit card processors stated firmly that they would not accept purchases from marijuana dispensaries. The fear if being prosecuted under federal law for allowing an illegal transaction to take place likely had at least something to do with it.

But now that the Colorado law has gone into effect, it seems that some of the processors are revising their stances on the issue. While American Express is persisting in not allowing purchases of recreational marijuana through its network, Visa and MasterCard have changed their tunes.

Change is coming

On January 6, Visa stated that it would now leave it up to banks to decide if purchases from marijuana dispensaries are legal or not. MasterCard stated that it still considers marijuana transactions to be illegal and that it would be deciding with banks how to deal with purchases.

Both of these moves amount to credit card processors relaxing the enforcement of their existing rules. Visa and MasterCard have acknowledged that this is a complex situation – federal and state laws conflict, and they’re not sure where they stand. Also, it’s a challenge to screen transactions from every single weed dispensary to figure out whether it’s operating legally or not, so both processors are essentially saying that they won’t be solely responsible for doing so.

Because of these changes, several marijuana merchants in Colorado have been allowing their customers to use credit cards. In some cases, they’re labeling the transactions as being for purchases other than weed, which is a violation of the card processors’ rules. But in other cases, pot retailers are being honest and hoping for the best.

Only time will tell if it will become easier to use a credit card to buy marijuana – in the meantime, customers and merchants are trying to figure it out together.

The bottom line: if you live in Colorado and want to buy recreational marijuana, don’t count on being able to use a credit card just yet. Bring cash for your purchase to be on the safe side – just like in the old days.

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