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Credit card companies keeping clear of cannabis

by Peter Andrew

The first day of 2014 saw the sale of marijuana for recreational use legalized in Colorado and Washington. A further 18 states (making 20 states in all) and Washington, D.C. already had laws in place on that date that permit the use of the drug for medical purposes. The federal government, of course, maintains its theoretical ban on the substance, although, operationally, enforcement has been rare where it would conflict with local legislation. Both the president and the Department of Justice have recently signaled their intentions to turn a blind eye to the most recent legalizations, according to a Jan. 9 Bloomberg report.

Weedy laws

If this conflict between state and federal laws causes problems for law enforcement officers, imagine what it's doing for those who run banks and credit card companies. Traditionally, those in the financial sector who knowingly handle the proceeds of drug trafficking frequently find themselves swapping their spacious Wall Street offices for somewhat more cramped accommodation in a federal penitentiary. How certain can they be that they won't fall foul of a zealous prosecutor or a change of administration if they now enable transactions that are legal and illegal at the same time?

Cannabis on credit

Understandably, very few -- possibly no -- credit card companies are currently accepting legal marijuana outlets as merchants. Chances are, if you know one that says it accepts plastic, it's lied to its bank or payment processor about the nature of its business.

However, that may change. MasterCard recently told USA Today that it had approached the federal government with a request for clarification of the legal position. But, for now, potheads may struggle to buy their drug of choice using plastic. They should also pause before withdrawing cash on their card accounts: credit card rates for cash advances tend to be significantly higher than those for purchases.

Published 01/22/14

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