By cbdoilmerchantservices June 13, 2025
Operating a CBD company means balancing on a bunch of regulations, risk, and payment processing issues. Even if you have absolutely nothing to lose, it’s not a rare occurrence for CBD payment processors to suddenly put a hold on or freeze your merchant account—sometimes without any notice. These holds can stall cash flow, destroy customer confidence, and risk losing your entire business. In this guide, we’ll outline smart, proactive measures you can take to minimize the risk of account disruptions and keep your payment systems running smoothly.
What Is a Merchant Account Hold?
Merchant account hold occurs when your payment processor briefly halts sending you the money from your credit card sales. Rather than deposit that cash into your business account, they hold it back—this is commonly known as a “funds hold.”
Unlike payment delays or rolling reserves that are standard, a hold typically indicates that something alerted the provider’s attention. This could be typical patterns of transactions, potential fraud, or a breach of your service contract. In other instances, you may have to wait as long as six months before you can access those funds again.
While in hold, you will not get any payments out of the impacted transactions. The funds remain on lock until the processor conducts its review and releases it. It is a very frustrating experience for any business, hence it’s important to pay great attention to your payment provider’s terms and maintain clear communication in case of any problems.
What Is a Merchant Account Freeze?
A merchant account freeze is one of the most serious actions a payment processor can take against your business. Unlike a hold, which only pauses your access to funds, a freeze completely shuts down your ability to process credit or debit card payments—and locks up any recent revenue as well.
This means no new transactions can go through, and any money from recent sales won’t hit your account until the freeze is lifted. For many small or mid-sized businesses, this can be financially devastating—especially if they rely heavily on daily cash flow to operate.
Freezes typically occur as a result of significant red flags such as suspected fraud, high chargebacks, or severe violations of your processing agreement. It is important to act fast, collaborate with your provider, and attempt to fix the problem to reinstate your account.
Why Merchant Accounts Get Shut Down (or Frozen)
Below are some frequent errors which cause major issues with your payment processor:
Breaking the Terms of Your Agreement
When you first receive approval for a merchant account, you’re agreeing to certain guidelines set in your processing agreement—such as how much you can process in a month or the average ticket size. Exceeding those levels without permission, can cause your provider to intervene quickly. It’s not necessarily a personal issue but because it’s a risk. Be within your agreed parameters or give your processor notice if you’re ramping up.
Too Many Chargebacks
Even when you do win a chargeback, it does impact your chargeback ratio—and payment processors watch this closely. A high ratio indicates that something is wrong, whether with your product, communication, or risk of fraud. By using tools for alerts, chargebacks can be prevented before they happen. Prevention is less expensive than cleanup.
Activity That Looks Like Fraud
Even if you’re operating in high security, strange account activity will ring bells. Perhaps your sales double in a night due to a hot promotion, or your average order volume shoots up overnight. While these are most likely indicators of business growth, they can also mimic fraudulent behavior to an algorithm. If you know a spike like this is coming, it’s a good idea to involve your payment provider in advance.
How to Protect Your CBD Business from Merchant Account Freezes and Fund Holds
In the world of CBD, managing risk is critical—especially when it comes to payment processing. CBD merchant account freezes or fund holds can paralyze your cash flow overnight. Here’s how to safeguard your CBD business from these disruptions.
1. Choose the Right Payment Processor
The first thing is choosing a processor that knows the CBD space. A specialized merchant account is best because it’s designed just for your business, leaving you in control with fewer surprise holds. Although it’s longer to get set up, you go through underwriting ahead of time—so there are fewer surprises afterward.
On the other hand, third-party processors such as PayPal or Square are fast to set up but usually don’t allow CBD. Even if you manage to pass through at first, they freeze or close your account later if your products go against their terms.
2. Avoid Excessive Chargebacks
Too many chargebacks can cause your account to be suspicious. Processors tend to view them as indicators of fraud or bad service. In the CBD industry, they’re particularly dangerous.
To avoid them, make product descriptions, shipping times, and return policies clear. Verify all transactions and respond promptly to customers if problems occur. A low chargeback rate is the key to account stability or staying open for business.
3. Be Alert for Fraudulent Activity
Fraud will freeze your account even more quickly than chargebacks. Suspicious activity—such as large orders that are not representative of your usual sales—can have your processor flag your account.
Use technologies such as Address Verification Systems (AVS), CVV checks, and fraud filters to prevent bad transactions before they occur. If you sell at the point of sale, use chip readers (EMV terminals) and lock down your POS system. Additionally always manually review suspicious orders before processing them.
4. Never Mix Business Types
If you already have an account for one business, don’t use that for the other business—even for a side hobby. Every merchant account receives an MCC (Merchant Category Code) that is based on your type of business. Accepting unrelated sales through the same account is against your agreement.
For instance, don’t use your CBD merchant account for selling pet products or supplements. This can result in an instant freeze or account termination. Open a new merchant account for every kind of business.
5. Maintain Detailed Records and Receipts
In case there’s a chargeback from a customer, your processor or bank will look into it. Proper documentation such as receipts, signed invoices, shipping confirmations, and communication records can support you in defending valid transactions.
Though it is hard to win chargeback disputes, demonstrating that you operate a reputable business is a huge help with your processor. It shows that you are executing best practices and that your compliance matters.
6. Refrain from Manual Card Entry
Manually keying in card numbers increases your fraud risk and processing costs. Too many of these transactions can make your processor suspicious, especially if you’re not set up as a business that typically operates that way.
If a customer’s card won’t swipe or tap, ask for another card or payment method. For phone orders, use a secure virtual terminal instead of entering the data manually on your POS device.
Smart Payment Habits for CBD Companies: Do and Don't’s
In order to maintain your sales revenue running and your accounts in balance, here’s a list of do’s and don’t’s that can help you get an hassle free business:
DO: Ideal Practices to Protect Your Sales
- Select a Processor Familiar with the CBD Industry: Don’t leave your payments in the hands of anyone. Partner with a payments provider that knows the legal complexities and compliance requirements of CBD companies. A high-risk account specialist processor can customize solutions to fit your individual products and risks.
- Label Products Transparently and Accurately: Clear labeling of products isn’t only great branding—it prevents conflict. Always provide details such as THC content, source material, method of extraction, and correct usage. Avoid the over-the-top health claims; they only lead to trouble and chargebacks.
- Provide More Than One Payment Method: Having only credit cards is risky. Mix up other payment methods like ACH transfers, digital wallets, or eChecks. A diversified system means you remain up and running even if one of them runs into a hitch.
- Use Tools That Prevent Chargebacks: Chargebacks can suck the money out of your revenue quickly. Utilize address verification, CVV checks, and fraud screening to detect suspicious behavior early. Additionally, ensure that customers are able to quickly identify your charges on their statements to prevent “what’s this?” refunds.
DON'T: Mistakes That Can Disrupt Your Payment Processing
- Don’t Use Generic or Standard Payment Processors: Mainstream providers rarely embrace CBD, even if they accept you initially. You might wake up one day to find your account frozen or your service cancelled. Deal with experts in high-risk payment solutions from the very beginning.
- Don’t Be Ambiguous About Billing Descriptors: If your company name on customer bank statements isn’t transparent, individuals will dispute simply because they don’t recognize the charge. Ensure your billing descriptor clearly displays your brand and product.
- Don’t Ignore Regional Compliance Rules: Just because a product is legal in one state doesn’t mean it’s legal everywhere. Always research where you’re selling, and build a compliance checklist to make sure your checkout process respects local laws.
- Don’t Let Disputes Drag On: Slowing down on responding to a chargeback claim can translate into automatic loss. Select a processor that supports you with a quick-dispute team that will move at the speed of light and file claims on your behalf as and when required.
Conclusion
Operating in the CBD niche has its special challenges, and maintaining your payment processing stable is one of the most important. By selecting the right high-risk processor, being open with your products, adhering to local compliance, and actively managing chargebacks and fraud risks, you can greatly reduce your risk of account holds or freezes. Keep in mind, a prepared merchant is a safeguarded merchant. The more you comply with processor expectations within your business practices, the better equipped you are to grow with confidence—without fear of shutdown.
FAQs
1. Why do CBD payment processors freeze merchant accounts?
Processors lock accounts when they notice compliance issues, unexpected spikes in sales, or fraud potential, even if it’s accidental.
2. How do I minimize the chances of a hold on a payment?
Use a processor with high-risk experience in CBD, maintain agreed limits, and be open about your products.
3. Do chargebacks account mostly gets freezed?
Yes—high chargeback rates indicate risk. Prevent them with tools such as AVS and transparent billing descriptors.
4. Can I process CBD payments through a regular processor?
No. Traditional processors tend to prohibit CBD and can freeze your account suddenly—even if you’re in compliance.
5. What do I need to do prior to processing high-ticket transactions?
Alert your processor in advance to prevent fraud notifications or automatic holds on uncommon transaction amounts.