Mastercard Bans Cannabis Sales On Its Debit Cards

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If your local dispensary once accepted debit cards with the Mastercard logo as payment, that has changed. Here’s how. 

Talk about harshing our collective mellow! Mastercard just made it harder for Americans to pay for medical or recreational marijuana with its debit cards. That’s right; the next time you walk into your local dispensary to make a purchase, debit cards with the Mastercard logo on them will have to stay in your pocket. Instead, you should plan on using another form of payment, like a Visa debit card (if your dispensary accepts cards of any kind) or cash.

Mastercard’s reasoning

According to a spokesperson for Mastercard, the company was made aware that Mastercard-branded debit cards were being used to buy marijuana and “quickly investigated it.”

In a statement to a CBS affiliate, a Mastercard representative wrote, “In accordance with our policies, we instructed the financial institutions that offer payments services to cannabis merchants and connects them to Mastercard to terminate the activity. Our rules require our customers to conduct lawful activity where they are licensed to use our brands. The federal government considers cannabis sales illegal, so these purchases are not allowed on our systems.”

In short, Mastercard cannot allow one of its cards to be used in the purchase of marijuana due to federal law that considers such transactions illegal. Although 38 states have legalized the use of marijuana in some form (medical, recreational, or both), Mastercard must comply with existing federal mandates.

Who’s hurt?

It’s difficult to make the argument that American consumers are damaged by losing the ability to pay for their supply with a Mastercard debit card. After all, pulling cash from an ATM to make the purchase will do the trick. The parties that appear to be most injured when debit cards cannot be used are local dispensary owners.

Scores of dispensaries nationwide are — and have always been — cash-only establishments. And when good guys keep cash on the premises, bad guys know where to hit. According to a 2022 NPR report, a surge in robberies of licensed cannabis shops has led to pistol-whippings, gunshots, and killings. And earlier this summer, WBMA in Gadsden, Alabama called the cash-only shops a “lucrative target for thieves.”

Alternate forms of payment

If you’re a regular at your local dispensary, you undoubtedly know which types of payment it accepts. However, if you’re not sure, give it a call to find out. The tricky bit about offering blanket advice regarding cannabis payments is that each state has its own laws and each dispensary has its own preferences. Still, here are a few ways folks are paying for their purchases:

Cash: As mentioned, you can always pay with cash.Non-Mastercard debit card: To date, there’s no indication that Visa has plans to suspend the use of its debit cards in cannabis dispensaries. If your card carries the Visa logo and your dispensary accepts debit cards, it remains a safe way to pay.ACH electronic transfer: ACH stands for Automated Clearing House and refers to transferring funds between banks without using checks, cards, or wire transfers. To be clear, not all dispensaries offer ACH electronic transfers as a payment option, but those that do allow customers to make their purchases by transferring money directly from their bank account to the dispensary’s account, bypassing the need for cash or a debit card.

The long and winding road to a solution

For the past 10 years, Democrats and Republicans have been in a stalemate over a bill called the SAFE Banking Act.

The SAFE Act would make it easier for financial institutions to provide services, including business bank accounts, to cannabis companies. With such accounts in place, dispensary owners could make regular bank deposits, clearing their safes of cash. In addition, allowing dispensaries to accept debit and credit cards would reduce the amount of cash that enters the premises.

Regardless of how a particular cluster of politicians feels about the use of medical or recreational marijuana, the issue is not going away. While most ancient cultures didn’t grow pot to get high, it has been used as a herbal medicine since around 500 BC. According to The History Channel, it wasn’t until the 20th century that political and racial factors led to the criminalization of weed.

The U.S. government says marijuana sales hit $65.7 million between July 1 and July 23, 2023. And those numbers are just the tip of the iceberg. As more states legalize cannabis shops, there will be even more cash sitting in safes. Whether Congress can work together to land a resolution is yet to be determined.

In the meantime, you may want to leave your Mastercard at home as you head to your local dispensary.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Dana George has positions in Target. The Motley Fool has positions in and recommends Mastercard, Target, and Visa. The Motley Fool recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.

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