Buying Marijuana With a Credit Card Just Got Easier

Federal guidelines for financial institutions provided some clarity for banks -- and, perhaps, credit card companies.

Feb 23, 2014 at 12:00PM


Source: Matthew Kenwrick.

The recently released guidelines from the Department of Justice and Treasury are being heralded as finally giving the go-ahead to banks to allow the legalized marijuana industry to bank like any other enterprise.

Basically, the government declared that chasing those involved with the newly legal pot business is definitely not at the top of its priority list.

Banks aren't the only financial entities standing in the way of the fledgling pot industry -- credit card companies Visa (NYSE:V), MasterCard (NYSE:MA), and American Express Company (NYSE:AXP) have been reluctant to allow their cards to be used for the purchase of legal weed -- but, that may now change.

An evolving situation
Last September, both Visa and MasterCard forbade the use of their cards at various medical marijuana dispensaries in California, probably because of a rumor that legal action was being considered by the U.S. Attorney against a specific dispensary in Oakland. Since January 1, when recreational use became legal in Colorado and Washington state, that stance has eased a bit.

While there has been no change in official policy, it appears the two payment giants are leaving the decision up to the local banks used in their networks. A statement by Visa in early January noted it will rely on the judgment of banks, given that the federal government "will not challenge state laws that legalize and regulate marijuana sales," according to the Denver Post. Though not commenting publicly, MasterCard seems to be following Visa's lead.

American Express, however, isn't taking any chances. The Wall Street Journal reported last month that the payments company was refusing to allow its cards to be used in any type of marijuana transactions, and the company kept a close eye on websites that request new contracts to enable them to accept the cards, just to be sure their policy is enforced.

That was then, this is now
With the new guidelines, American Express may soften its position. For Visa and MasterCard, the guidance could mean more profits -- without the card companies having to do anything extra on their end. But, despite the giant step taken by the Obama administration to clarify the situation, banks themselves still seem leery.

For instance, the president of the American Bankers Association has responded with caution, welcoming the guidelines, but noting banks that involve themselves in the marijuana trade could still face sanctions, regardless of the legality of the weed at the state level. An executive vice president of FirstBank in Colorado was more succinct, noting the guidelines do not increase his bank's comfort level enough to take a chance with the budding pot industry.

It seems clear a change in federal law will be needed to prompt many banks to tiptoe into the legalized marijuana business. In the meantime, those that do dive in will boost their profits -- and those of their credit card company partners, too.

Bye-bye credit card
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Amanda Alix has no position in any stocks mentioned. The Motley Fool recommends American Express, MasterCard, and Visa. The Motley Fool owns shares of MasterCard and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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