You sell incredible products with a steady stream of customers.
Business seems relatively successful until a major roadblock—Stripe holds your money.
Suddenly, your cash flow comes to a screeching halt, leaving your business stagnant and you frustrated.
Stripe’s practice of holding merchant funds, freezing accounts, and terminating them altogether has become a contention among business owners.
It’s a situation no one wants to face, as it can disrupt operations, hinder growth, and cause undue stress.
This comprehensive guide will explore the reasons behind these practices, uncover the timelines involved, and examine the potential consequences for your business.
But it doesn’t stop there.
We’ll also equip you with practical solutions to get your money back, as well as preventive measures to avoid future fund holds.
Before we dive in:
Table of Contents
- Here’s the Summary of Our Key Findings
- How Long Can Stripe Hold Funds?
- How to Get Your Money Back
- Reasons that Stripe Holds Funds
- Why Your Account May be Frozen or Terminated Without Notice
- What Stripe’s User Agreement Says About Holds, Freezes, and Termination
- What You Can Do About Withheld Funds
- How to Prevent Stripe From Holding Your Funds
- Understand and Adhere to Stripe’s Terms of Service
- Final Thoughts
- Frequently Asked Questions (FAQs)
Here’s the Summary of Our Key Findings
- Stripe can hold funds for various reasons, including suspicious transactions, high chargeback rates, violations of terms of service, and regulatory compliance issues.
- The length of time Stripe can hold funds varies depending on the specific circumstances, ranging from the initial payout schedule to extended holds that can last up to 180 days.
- Getting your money back requires open, effective communication channels with Stripe, addressing risk and compliance concerns, and being prepared to provide detailed information about your business and transactions.
- Choosing the right payment processor, such as GETTRX, can help prevent fund holds by selecting a provider that aligns with your business needs and industry.
- Transparency and honesty in your account setup can prevent misunderstandings and account freezes.
- Implementing measures to minimize chargebacks and fraud, such as robust security protocols and excellent customer service, can reduce the risk of fund holds.
- Understanding and adhering to Stripe’s terms of service is crucial to maintaining compliance and avoiding account issues.
- Maintaining good customer communication and low chargeback rates can help prevent disputes and further complications with fund holds.
- Consider seeking legal advice if you believe Stripe is unfairly holding your funds or if you encounter significant issues.
- Prevention is key. By implementing proactive strategies and preventive measures, you can minimize the likelihood of fund holds, ensuring a smoother payment experience for your business.
How Long Can Stripe Hold Funds?
When you initiate a transaction with Stripe, funds are expected to reach your account promptly.
Yet, there are moments when you discover that your funds have taken a detour.
Here’s how long Stripe can hold your funds:
Initial Payout Schedule
Firstly, it’s important to note that Stripe operates on a ‘rolling payout schedule.’ This schedule is the time between when a payment is first received from a customer and when it is deposited into your bank account.
The exact length of this payout schedule can vary depending on your business’s location and industry, among other factors.
For businesses based in the United States and operating in most industries, the initial payout takes seven days (if the account was approved on a business day).
For instance, if Stripe approves your account on a Wednesday, any payments received starting from that day will be grouped and deposited in your bank account the following Wednesday.
However, accounts in certain higher-risk industries may be subject to a longer initial payout schedule of up to 14 days.
Stripe does this to minimize potential risks and liabilities associated with these types of businesses. This extra time allows Stripe to thoroughly vet the transactions and guard against fraud.
Once your initial payout is complete, Stripe moves to a shorter schedule.
This is typically two business days for US-based businesses in standard risk industries.
Do bear in mind that weekends and bank holidays can affect this schedule. If a payout date falls on a weekend or bank holiday, it will be moved to the next business day.
For example, if your two-day payout period ends on a Saturday, you will receive your funds on Monday, the next business day.
In some cases, Stripe might hold your funds for longer periods – even up to 180 days. These extended holds are not the norm and usually occur when there’s a suspicion of fraudulent activity or violations of Stripe’s terms of service.
This hold allows Stripe to investigate the situation thoroughly and protect all parties involved.
How to Get Your Money Back
Should you find yourself in a situation where Stripe is holding your funds, don’t panic.
While it’s stressful, remember you have several paths towards resolution. Follow these steps to reclaim your funds.
Communicate with Stripe
Regardless of the reason behind the hold, the first step is communicating with Stripe. While this may seem like an obvious step, it’s crucial to ensure that this communication is constructive and effective.
When you contact Stripe, be prepared to provide detailed information about your business and the transactions in question.
The more clarity you can provide, the easier it will be for Stripe to assist you.
Keep records of all your transactions, customer communications, and any relevant documentation that clarifies your situation.
Review Your Business Operations Closely
If Stripe has flagged your account due to suspected fraudulent activities or high-risk transactions, it’s important to review your business operations closely.
Examine your transaction patterns for any anomalies and assess whether there might be some legitimacy to Stripe’s concerns.
If you find that the issues raised by Stripe are indeed valid, take corrective actions immediately.
This might involve tightening your business’s security measures, improving customer service to reduce disputes, or revising your refund policies to minimize chargebacks.
If, on the other hand, you believe there has been a misunderstanding or an error, present your case to Stripe clearly and concisely.
Provide as much evidence as possible to show that your business is operating legitimately and that any unusual transaction patterns are justified.
Review and Rectify Terms of Service Violations
In case of a hold due to violations of Stripe’s terms of service, start by understanding which part of the terms you allegedly violated.
Carefully review the terms of service and your business operations to identify the areas of contention.
Once you’ve identified the problem, rectify it promptly. This might involve adjusting your business practices to comply with Stripe’s terms or ceasing the violation entirely.
After making the necessary changes, reach out to Stripe and explain your steps to address the issue.
Remember, Stripe’s goal is to ensure a safe and reliable platform for all users, and demonstrating your willingness to comply with their rules can go a long way in resolving the issue.
Seek Legal Advice if Necessary
If your funds are on hold due to regulatory issues, you may need legal advice. Legal and regulatory requirements can be complex, and ensuring your business is fully compliant is essential.
Consider consulting with a legal professional specializing in financial regulations to help navigate this scenario.
Once you have addressed the regulatory issues, communicate this to Stripe.
Show them your actions to comply with the regulations and ask for their guidance on any further steps you need to take.
Remember, your best ally in getting your money back is open and effective communication with Stripe.
Understand their concerns, address them appropriately, and maintain a professional dialogue.
Reasons that Stripe Holds Funds
It’s undeniably frustrating when your funds are held, particularly when you need clarification on why it’s happening.
Having an understanding of the potential reasons behind a Stripe hold can not only alleviate some of that stress but also help you prevent such situations in the future.
Some common reasons why Stripe may choose to hold your funds.
Risky Transactions and High Chargeback Rates
The nature of the transactions you process can significantly impact whether or not Stripe decides to hold your funds. Specifically, transactions that Stripe deems risky can lead to holds.
High-risk transactions could include unusually large sales, sudden spikes in sales volume, or an abnormally high number of international transactions.
These transactions can sometimes signal fraudulent activity, which Stripe is keen to prevent.
Similarly, a high rate of chargebacks — when customers dispute a charge and have the amount returned — can also cause Stripe to hold your funds.
A high chargeback rate can indicate customer dissatisfaction or potential fraud.
Preventing High-Risk Transactions and Chargebacks
To mitigate the risk of high-risk transactions, monitor your sales activity closely.
If you’re anticipating an unusual sales pattern, such as a large sale or a sudden increase in volume, consider notifying Stripe ahead of time.
By communicating proactively, you can reassure Stripe that these transactions are legitimate.
To reduce your chargeback rate, focus on providing excellent customer service, delivering high-quality products or services, and maintaining clear, open lines of communication with your customers.
Clear return and refund policies can also help prevent chargebacks.
Violations of Stripe’s Terms of Service
Like any platform, Stripe has a set of rules and regulations that users must follow. Violating these terms of service can result in Stripe holding your funds.
Violations can include selling prohibited products or services, engaging in deceptive business practices, or failing to meet certain legal or regulatory requirements.
The simplest way to avoid violating Stripe’s terms of service is to familiarize yourself with them and ensure full compliance.
Regularly reviewing these terms and making necessary adjustments to your business practices can help you avoid holds due to violations.
Account Verification Issues
When setting up your Stripe account, you are required to provide specific details about your business for verification purposes.
If there are issues with this verification process, such as missing information, incorrect details, or a failure to provide the required documents, Stripe might hold your funds.
Ensuring Successful Verification
To avoid holds due to verification issues, accurately provide all the necessary information during the account setup process.
If Stripe requests additional documentation, provide it promptly to keep your account in good standing.
Occasionally, Stripe may need to hold funds due to regulatory requirements.
This could be due to law enforcement requests, sanctions checks, or compliance with financial institution rules or network regulations.
While predicting these types of holds can be challenging, maintaining a legitimate, transparent business operation can help.
Regularly consulting with a legal advisor or a compliance expert can also keep you abreast of any regulatory changes that might affect your business.
If Stripe closes your account either because you’ve chosen to close it or because Stripe has done so due to other issues, the company may hold your funds.
This can be a protective measure against any potential disputes or chargebacks that could arise post-closure.
Preventing Account Closure
To prevent an involuntary account closure, ensure you comply with Stripe’s terms of service, maintain a low chargeback rate, and operate a transparent, legitimate business.
If you close your account, be aware that Stripe may hold funds and plan your cash flow accordingly.
Understanding the reasons behind Stripe’s decision to hold funds is the first step in preventing such situations.
By operating within Stripe’s guidelines and maintaining open lines of communication with the platform, you can significantly reduce the chances of experiencing a fund hold.
Why Your Account May be Frozen or Terminated Without Notice
In digital transactions, freezes and terminations can happen unexpectedly, leaving merchants in a state of flux.
But why does this occur without notice?
Stripe’s user agreement outlines that they reserve the right to change the payout schedule, impose holds, or freeze an account as necessary based on their risk assessment.
This may occur if Stripe believes your activities may result in disputes, chargebacks, or other risks associated with your Stripe account.
They may also consider your creditworthiness or the validity of the information you provided during account setup.
Suppose Stripe detects a higher risk of fraudulent activities linked to your account or has reason to believe your business practices may be unethical or non-compliant with their policies, they may freeze or terminate your account.
Compliance and Regulatory Obligations
Stripe is bound by laws and regulations pertaining to financial transactions. If Stripe believes that your account may be violating these regulations, they may freeze or terminate your account.
This includes any suspicion of involvement in money laundering, financing terrorism, or any other illegal activity.
Failure to Comply with Stripe’s User Agreement
Stripe’s user agreement includes several conditions that users must abide by. Failure to meet these conditions can lead to account freezes or terminations.
For instance, if your business falls under their list of prohibited businesses or if you violate their terms of service, Stripe may hold your funds, freeze your account, or even terminate your account.
High Risk Businesses
Certain business types are considered high-risk due to the nature of their operations, the high potential for chargebacks, or the regulatory challenges they face.
If your business is classified as high-risk by Stripe, your account may be subject to holds, freezes, or terminations.
What Stripe’s User Agreement Says About Holds, Freezes, and Termination
The terms and conditions of Stripe’s user agreement outline the circumstances under which your funds might be held, your account frozen, or your contract terminated.
Holds and Freezes
As per Stripe’s user agreement, the company reserves the right to hold funds or freeze accounts in the event of suspected or actual fraudulent transactions, violations of their terms of service, or breaches of regulatory requirements.
Funds can be held for as long as it takes Stripe to complete any necessary investigations. In the case of a chargeback, Stripe might hold the disputed amount until the chargeback is resolved, which can take 90 to 180 days.
If Stripe freezes your account, you may be unable to process transactions, withdraw funds, or both. This could last until Stripe completes its investigation or you resolve the issues leading to the freeze.
In more serious cases, Stripe may terminate your account without notice. Situations that might lead to termination include ongoing fraudulent activities, continuous non-compliance with Stripe’s terms of service, or persistent regulatory violations.
Stripe will typically hold any remaining funds for 90 to 180 days when an account is terminated.
This is to cover any potential chargebacks or disputes that may arise after the termination.
- Stripe reserves the right to change the payout schedule or impose a hold at any time following a risk review.
- If Stripe believes that your activities may result in many chargebacks, disputes, or other forms of liability, they may hold your funds.
- Stripe can terminate your account if they believe it’s necessary due to legal requirements if they suspect fraudulent activities, or if you’ve violated their terms of service.
- Stripe may hold your funds for up to 180 days upon termination to cover potential chargebacks or disputes.
What You Can Do About Withheld Funds
Being faced with withheld funds can be challenging, especially when it impacts your business’s cash flow and operations. However, you’re not powerless in this situation.
There are several steps you can take to mitigate the impact and address the root cause of the issue, which include;
Open a New Merchant Account
Opening a new merchant account with another payment processor can be a practical step if your account with Stripe has been terminated or if holds have become a persistent problem.
This step can provide an alternate route for processing payments and maintaining cash flow while you resolve issues with your Stripe account.
However, consider a few factors before taking this step.
- Understand the terms and conditions of the new processor to avoid falling into similar issues that led to your troubles with Stripe.
- Ensure the new processor caters to your business needs and integrates well with your existing systems.
- Be transparent with the new processor about the issues you face with Stripe to prevent any surprises down the line.
Remember, this step doesn’t resolve the issue with Stripe, but it can keep your business running smoothly.
Open a new merchant account with GETTRX for transparent billing and exceptional customer service.
Inform Your Customers
Communication is key in any business relationship. If you’re experiencing issues with your payment processor that affect your customers.
For example, if they might face delays in refunds or their payments can’t be processed, inform them as soon as possible.
Clear and proactive communication can help maintain trust and prevent further issues, such as disputes or chargebacks, which could complicate your situation with Stripe.
Be transparent about your issues, explain how customers might be affected, and provide alternative solutions.
Also Read: 18 Terms to Know Before Choosing a PayFac
Negotiate the Terms for Releasing Funds
In some cases, it might be possible to negotiate with Stripe to release your funds. This generally requires you to address the reasons for the hold and demonstrate that you’ve taken steps to mitigate any risks.
If the hold was due to high chargeback rates, you could show Stripe the measures you’ve implemented to reduce chargebacks.
If it was due to regulatory non-compliance, present evidence of your corrective actions.
Remember, Stripe wants to ensure a safe and secure platform for all users. If you show them you’re committed to resolving the issues, they may be more inclined to release your funds sooner.
Stay in Constant Communication with Stripe
As with any relationship, keeping the lines of communication open with Stripe is vital. Regular updates on your actions to resolve the issues can help you maintain a good relationship with Stripe.
They can guide you on what steps you need to take and inform you of any changes in your account status.
Consult a Legal Professional
Consulting with a legal professional is advisable if your funds are being held due to legal or regulatory issues.
They can provide expert guidance on navigating these complex matters and ensure your business complies with all necessary regulations.
Dealing with withheld funds is not a situation any business owner wants to find themselves in.
By understanding the reasons behind the hold and taking proactive steps to address them, you can move toward a resolution and get your business operations back on track.
How to Prevent Stripe From Holding Your Funds
As said earlier, having your funds held by Stripe can be a disruptive experience
But the good news is,
You can take practical measures to minimize the risk of this happening.
These measures include;
Choose the Right Processor
Your choice of payment processor plays a significant role in the smooth operation of your financial transactions.
Although Stripe is a popular option due to its advanced features and ease of use, there might be better fits for some businesses.
If your business operates in an industry that Stripe considers high-risk or if you’ve experienced issues with fund holds, consider payment processors that specialize in high-risk industries or those with more lenient hold policies.
This is where GETTRX comes in.
GETTRX offers a tailor-fit payment processing platform to accommodate various types of businesses.
Whether you run an e-commerce shop, a subscription-based service, or a non-profit organization, GETTRX has solutions for you, providing a range of services from fast merchant account approval to robust POS systems, ensuring that your business operations run smoothly.
Moreover, GETTRX offers 24/7 customer service, in-house risk management, and next-day funding for qualified merchants – all the necessary features to help you avoid encountering issues with fund holds or freezes.
If you’ve been dealing with Stripe holding your funds, why not give GETTRX a try?
We might be the partner you need to keep your business transactions flowing without hitches.
Be Honest with Your Account
One of the common reasons for fund holds account freezes or even termination is when Stripe discovers that a business’s practices do not align with the information provided during the account setup.
To avoid this, be completely transparent about your business from the outset.
This includes providing accurate details about your products or services, business model, average transaction size, and expected monthly volume.
If your business undergoes significant changes, update your account details accordingly to keep Stripe in the loop.
Minimize Chargebacks and Fraud
High rates of chargebacks and fraudulent transactions can make your business appear risky, prompting Stripe to hold funds for longer periods. Implement measures to minimize these risks.
This could involve enhanced security measures like two-factor authentication, secure payment gateways, and strict data protection protocols.
Encourage customers to use secure payment methods, and be vigilant in identifying and handling suspicious transactions.
A comprehensive return and refund policy and excellent customer service can also help minimize chargebacks.
Promptly address customer concerns and resolve disputes amicably before they escalate into chargebacks.
Maintain Transparent Business Practices
Conducting your business transparently can help avoid misunderstandings with Stripe. Ensure that your pricing, terms of service, refund policy, and other key business details are clearly communicated to your customers and Stripe.
If your business model involves recurring payments or subscription services, make sure customers know the charges they will incur and when they will be billed.
Providing clear invoices and keeping records of customer agreements can also be helpful.
Secure Your Transactions
Implementing robust security protocols protects your business and customers from fraud and signals to Stripe that you take risk management seriously.
Use secure checkout systems, encrypt sensitive data, and comply with PCI-DSS standards.
Regularly monitor your transactions for suspicious activities and take immediate action when needed.
Understand and Adhere to Stripe’s Terms of Service
Stripe’s terms of service provide guidelines on what they expect from businesses using their platform.
Fully understanding and adhering to these terms helps prevent misunderstandings that lead to fund holds or account issues.
By taking these proactive measures, you can reduce the likelihood of Stripe holding your funds and ensure smoother business operations.
It’s all about minimizing risk, transparency, and building a trustworthy business.
Fund holds are a reality in the payment processing industry, but they don’t have to be insurmountable obstacles.
By implementing the strategies outlined in this article, you can minimize disruptions, protect your cash flow, and focus on growing your business.
Frequently Asked Questions (FAQs)
Can Stripe Hold My Funds Without Any Reason?
No, Stripe does not hold funds without reason. A specific cause is always behind a fund hold, such as suspected fraudulent activity, high chargeback rates, or violations of their terms of service.
Are There Specific Industries More Prone to Fund Holds?
Yes, certain industries are considered higher risk due to a greater likelihood of fraudulent transactions or chargebacks. Businesses operating in sectors like online gaming, adult content, or travel may face longer initial payout schedules or extended holds.
Can I Expedite the Resolution of a Fund Hold With Stripe?
While there is no guaranteed way to expedite the resolution, prompt communication and cooperation with Stripe’s support team can help streamline the process. Providing any requested information or documentation promptly can also aid in resolving the hold more quickly.
Can I Still Accept Payments While the Funds Are on Hold?
In most cases, you can continue to accept payments while funds are on hold. However, the held funds will be available for withdrawal or transfer once the hold is resolved.
Can I Dispute a Fund Hold Decision Made by Stripe?
If you believe that a fund hold decision by Stripe is incorrect or unjustified, you can dispute it by providing additional evidence or clarification to support your case. Contacting Stripe’s support team and following their instructions is the recommended course of action in such situations.