Please ensure Javascript is enabled for purposes of website accessibility

Buying Marijuana With a Credit Card Just Got Easier

By Amanda Alix - Feb 23, 2014 at 12:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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

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 (V 0.84%), MasterCard (MA 1.19%), and American Express Company (AXP -0.49%) 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

American Express Company Stock Quote
American Express Company
AXP
$153.24 (-0.49%) $0.76
Mastercard Incorporated Stock Quote
Mastercard Incorporated
MA
$336.18 (1.19%) $3.96
Visa Inc. Stock Quote
Visa Inc.
V
$199.03 (0.84%) $1.66

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.