Stripe has become a widely-used payment processor, especially for eCommerce businesses. But for some merchants, Stripe’s policies around holding funds can disrupt cash flow and create financial stress. Stripe can hold funds for up to 180 days, and some merchants report receiving emails every 90 days stating, “Stripe is holding your funds for an additional 90 days.”
This article explains why Stripe holds funds, how you can work towards getting those funds released, and ways to avoid holds in the future.
Why Does Stripe Hold Funds and Freeze Accounts?
Stripe holds funds to manage risk. High-risk transactions or businesses in industries with high chargeback rates, such as supplements, CBD, and dropshipping, are more likely to experience holds, freezes, or even account terminations.
Stripe’s hold types include:
- Temporary holds: Funds are held until you perform a specific action.
- Account freezes: No money in, no money out; Stripe stops all transactions.
- Account terminations: Your account is permanently closed, and you lose access to any withheld funds.
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Stripe is generally better suited for low-risk businesses and may not be the best fit for businesses with high-risk products or large ticket sales.
What Stripe’s User Agreement Says About Holds and Freezes
According to Stripe’s user agreement, the company can impose a reserve at any time and freeze or terminate accounts at its discretion. This means that Stripe has the right to hold funds for as long as they see fit, especially if they perceive a high level of risk associated with your business.
Steps to Get Withheld Funds Released
If Stripe has held your funds, there are steps you can take to recover them. Here’s a practical approach to work with Stripe and keep your business operational.
1. Open a Backup Merchant Account
Start by opening a new merchant account with another payment provider. This ensures your business can continue accepting payments and processing orders while you address the hold on your Stripe funds. Keeping multiple merchant accounts is a good strategy to avoid relying solely on one processor.
2. Notify Customers and Provide Solutions
If orders are affected by the hold, reach out to customers. Explain the situation, cancel any impacted orders, and encourage them to place their orders again. For a better customer experience, consider offering a small discount to incentivize reorders. Remember to communicate openly to maintain trust and loyalty.
3. Contact Stripe Support and Negotiate Fund Release Terms
When approaching Stripe support, be professional and prepared. Request to speak with someone handling withheld funds or account freezes and avoid sounding confrontational. Often, Stripe holds funds pending specific documentation. If that’s the case, provide the necessary information promptly.
Be proactive about showing Stripe that you’re managing risk by maintaining low chargebacks and providing fraud prevention documentation.
By doing so, you may be able to negotiate an early release of your withheld funds.
How Disputifier Helps Prevent Stripe Holds and Fund Freezes
When chargebacks and disputes accumulate, Stripe may respond by placing holds on your account or freezing funds to mitigate risk. High chargeback ratios are often the trigger, leading Stripe to impose a reserve hold, limit payouts, or even freeze the account entirely.
By reducing chargebacks through effective prevention and automated responses, Disputifier helps lower the likelihood of these holds. Real-time alerts allow you to act on disputes immediately, preventing them from turning into official chargebacks.
Through optimized chargeback responses and automated alerts, Disputifier keeps your chargeback ratio within safe limits, helping avoid Stripe’s penalties. With fewer disputes, Stripe is less likely to view your business as high-risk, allowing smoother payouts and faster access to your funds.
In essence, Disputifier not only handles chargebacks efficiently but also indirectly supports uninterrupted cash flow by reducing the risk of account holds and fund freezes.
Tips to Avoid Stripe Holds and Freezes in the Future
To prevent account issues with Stripe, consider these strategies to keep your funds accessible and your business running smoothly.
Choose the Right Payment Processor
Payment processors like Stripe, Square, and PayPal are convenient but aren’t always ideal for high-risk merchants. High-risk merchant accounts are better suited for businesses with chargeback-prone industries. These accounts often come with terms that better match your business model and lower the risk of holds or freezes.
Maintain Transparent Account Information
Be honest with Stripe about your business type. Misrepresenting your business or using an MCC (Merchant Category Code) that doesn’t accurately reflect your services may result in account holds. For businesses that run multiple models, consider separate merchant accounts to avoid suspicion of inconsistent activity.
Proactively Minimize Chargebacks and Fraud
High chargeback ratios often trigger holds, so minimizing disputes can keep your account in good standing. Stripe provides some fraud detection tools, but using 3D Secure or publishing a clear return policy can further help. Ensure customers know how to get in touch with you to resolve issues directly.
Should You Consider a High-Risk Merchant Account?
If Stripe’s policies have negatively affected your business, consider switching to a high-risk merchant account. These accounts are specifically designed for businesses that Stripe and similar providers consider risky. High-risk merchant accounts offer several benefits:
- Customizable terms and lower freeze risks.
- Better fraud protection and chargeback management.
- API and plugin support for checkout customization.
High-risk merchant accounts help you avoid the cash flow issues that often accompany Stripe’s reserve policies.