Key Takeaways
- Cigar merchants face new Visa and Mastercard high-risk registration fees in 2025 — now $950 for Visa and $500 for Mastercard per year.
- These fees apply to all tobacco-related businesses due to regulations, chargeback risks, and fraud concerns.
- Non-compliance can lead to fines or account termination.
- To offset costs, merchants should verify their Merchant Category Code (MCC 5993), negotiate rates, adjust pricing, and strengthen fraud prevention.
- Durango Merchant Services offers customized high-risk accounts, chargeback protection, and expert compliance help to keep cigar businesses profitable and compliant in 2025.
Table of Contents
As a cigar merchant, running a successful business in the tobacco industry comes with unique challenges. From strict regulations and age restrictions to elevated chargeback risks, securing reliable payment processing is essential to keep your operations smooth and profitable. Recent updates from Visa and ongoing requirements from Mastercard have increased the financial burden for high-risk businesses like cigar shops, online retailers, and wholesalers.
At Durango Merchant Services, we specialize in high-risk merchant accounts customized for the needs of the cigar industry, helping you manage these fees while ensuring seamless credit card processing. In this guide, we’ll break down the latest on high-risk registration fees, their impact on your cigar business, and strategies to optimize your operations for profitability.
Understanding High-Risk Classification for Cigar Merchants
Cigar and tobacco businesses are often classified as high-risk due to factors like federal and state regulations (e.g., FDA compliance), potential for fraud, and higher chargeback rates from issues like unauthorized purchases or delivery disputes. Your Merchant Category Code (MCC)—typically 5993 for cigar stores and stands—flags your business for extra scrutiny from Visa and Mastercard. This classification requires annual registration to accept card payments, but it comes with fees to cover enhanced monitoring and risk management.Whether you run an online cigar shop, a brick-and-mortar store, or a wholesale operation, these fees are non-negotiable to maintain Visa and Mastercard acceptance. Non-compliance could lead to fines, account termination, or lost sales—significant setbacks in the competitive, niche market of premium cigars.
Visa’s High-Risk Registration Fee Increase
Effective April 1, 2024, Visa raised its annual high-risk registration fee from $500 to $950 for merchants in regulated industries like tobacco. This increase aims to address risks such as age-verification failures or international shipments, but it directly impacts your margins, especially on high-ticket items like premium cigars, humidors, or accessories. For cigar merchants processing thousands in monthly sales, this $450 hike adds up quickly, cutting into profitability.
Mastercard’s High-Risk Registration Fee
Mastercard maintains its annual high-risk registration fee at $500 for tobacco-related businesses. While unchanged recently, this fee often comes with additional costs like setup fees (potentially thousands of dollars) and tiered processing rates based on your risk profile, sales volume, and processing history. For cigar merchants, these fees protect banks and processors from chargebacks tied to product quality disputes or regulatory issues, but they can strain cash flow in an industry already navigating advertising restrictions and market volatility.
The Impact on Cigar Merchants
The combined weight of Visa’s $950 and Mastercard’s $500 fees means an annual cost of $1,450 just for high-risk registration—before factoring in transaction fees, which can add hundreds more for high-volume sellers. In the cigar industry, where margins on premium products can be tight, these costs compound challenges like chargebacks (estimated at $100 billion industry-wide annually) and compliance hurdles. Failure to comply with registration requirements can also lead to penalties or loss of card processing privileges, making it critical to stay on top of these obligations.
Strategies to Manage High-Risk Fees
To minimize the impact of these fees and protect your bottom line, consider the following strategies:
- Review Your MCC: Ensure your Merchant Category Code (5993 for cigars) is accurately assigned to avoid unnecessary high-risk fees. Our team at Durango Merchant Services can verify and optimize your classification.
- Negotiate Processing Terms: Partner with a high-risk specialist like Durango to secure lower processing rates, waive setup fees, and bundle services for cost efficiency.
- Adjust Pricing Strategically: Consider passing minimal costs to customers through subtle pricing adjustments or loyalty programs, while emphasizing the value of your premium tobacco products.
- Enhance Fraud Prevention: Implement tools to reduce chargebacks from age-restricted sales or shipping disputes. Our partnership with Fraud Deflect can deflect up to 20% of disputes, potentially saving thousands annually (e.g., $6,600 on 200 disputes).
How Durango Merchant Services Can Help with Your Cigar Merchant Account
At Durango Merchant Services, we understand the unique needs of cigar and tobacco merchants. We offer specialized high-risk merchant accounts tailored for the cigar industry, including secure online payment gateways, age-verification integrations, and international processing capabilities. Our partnership with Fraud Deflect helps minimize chargebacks and fees, ensuring you can accept Visa and Mastercard without disruptions. Our dedicated account managers handle registration, compliance, and risk monitoring, so you can focus on sourcing the finest cigars and building customer loyalty.
Stay Compliant and Profitable in 2025
With Visa’s fee increase in full effect and Mastercard’s steady requirements, now is the time to reassess your payment processing strategy. Don’t let high-risk registration fees erode your profits in the competitive cigar market. Partner with Durango Merchant Services for expert guidance, cost-effective solutions, and seamless tobacco payment processing.Contact us today at durangomerchantservices.com for a free consultation and discover how we can help your cigar business thrive in 2025!
Frequently Asked Questions
Why are cigar merchants considered “high-risk” by Visa and Mastercard?
Cigar and tobacco businesses fall under the high-risk category because of strict federal and state regulations, age-verification requirements, and a higher chance of chargebacks from delivery or authorization issues. This classification (MCC 5993) requires extra monitoring and annual registration fees with Visa and Mastercard to keep your payment processing active and compliant.
How much are the new Visa and Mastercard high-risk registration fees for 2025?
As of April 1, 2024, Visa’s annual fee increased from $500 to $950 for regulated industries like tobacco. Mastercard’s fee remains $500, though merchants may also face setup costs or tiered rates. Together, cigar merchants can expect around $1,450 per year in registration fees—before factoring in transaction fees and other costs.
What happens if a cigar merchant doesn’t register as a high-risk business?
Skipping registration can lead to penalties, frozen funds, or even loss of Visa and Mastercard processing privileges. For cigar retailers and wholesalers, that means lost sales and customer trust. Staying registered and compliant is non-negotiable if you want to keep accepting card payments.
How can cigar merchants reduce the impact of high-risk fees?
You can soften the blow by verifying your Merchant Category Code, negotiating better rates with a high-risk processor, and improving fraud prevention to lower chargebacks. At Durango Merchant Services, we help cigar merchants secure better terms, bundle services to cut costs, and use tools like Fraud Deflect, which can stop up to 20 percent of disputes—saving thousands a year.
