The panic-stricken, adrenaline-induced frenzy of researching solutions about what to do when Stripe holds funds—or worse, terminates your account—has been performed by countless merchants. If that’s any reason to relax a little then take it, because it means there is a solution.
In fact, there are solutions to cover every aspect of this type of situation whether it’s with Stripe or some other processor. And most importantly, we’ll show you how to get your business back up and running with minimal impact to cash flow.
Always Remember That Stripe Is in Control
Companies like Stripe are great to get up-and-running in an instant. They’re quick to approve your account and get set up. But if you start scaling too quickly, it makes the platform nervous. And that makes them very quick to shut down businesses and force account cancellations.
3rd-party Platform Rules
Stripe.com is a 3rd-party processor similar to PayPal. That means you run on their platform and follow their rules. They have the power to control which businesses they support, which businesses they don’t, and who can continue using their platform at any given time. It’s in the user agreement when you sign up for your account. A lot of sellers see Stripe as a difficult to work with, but their terms are clear for those who read them.
They Rarely Reverse Decisions
Unfortunately, if your account is terminated or funds are withheld, Stripe will rarely reverse their decision. Your account likely won’t get reinstated and your funds won’t be returned to you right away and additional information would be required to get your funds are no longer held.
You can still try to convince them otherwise, but your efforts are better placed in opening a new merchant account with a different payment processor for your cart. You might even be able to open another Stripe account if you haven’t been blacklisted.
Why They Hold Funds
Usually, you will receive an email from Stripe saying something along the lines of “your account is closed because you violated our terms and conditions.” There’s very little detail, which might leave you wondering what you did wrong. Customer support will provide little information as well adding to the mystery.
If they hold funds or terminate your account, it’s likely because you are a high-risk merchant or have high chargebacks. Sellers of supplements, subscriptions, advice, dropshippers, and more are all considered high risk. There’s a seemingly endless list for what constitutes high-risk sellers, and Stripe doesn’t support any of them.
You Will Get Your Money Back…Eventually
It takes time to get your money back, but it will happen. This period is something we like to call the “chargeback guarantee period” because it makes up the amount of time (and then some) chargebacks will occur. This is usually 6 months, but they sometimes hold funds up to 9 months.
You can think of it like a forced reserve, where they hold money from you in case of refunds and chargebacks. That way, the bank isn’t risking their own finances because they have a pool of your funds to dip into. It helps your account avoid having a negative balance and you from paying even more Stripe fees.
If you want your money sooner, it’s possible to get some of it back before that 6-month period. Keep in mind that Stripe needs to keep a portion of the withheld funds for chargebacks and other transaction fees. Knowing this, call the Stripe support phone number a couple of weeks after receiving the initial notice and negotiate with them to return part of the funds, not all of them. Those initial weeks are a period in which Stripe is waiting to see if and how many chargebacks. Your chances of negotiating a payout schedule with their customer support team are greater if you receive little to no chargebacks.
They may not agree to negotiate, in which case you’ll get your payout in 6 months, sometimes 9 months if you are high-risk or have large amounts of chargebacks.
The Most Important Thing Is to Get Payment Processing ASAP
Don’t get caught up on resolving the issue you have with Stripe right away. You’ll likely have to wait some time before anything happens with them. And the longer you wait, the less opportunity you have to make sales. So focus on obtaining a merchant account or payment processing solution ASAP to get your store going again and start accepting card payments.
Open Another 3rd-party Account
Yes, Stripe.com is a 3rd-party processor. Yes, Stripe terminated your account or withheld funds. Yes, that could happen again. But right now, you need to get your payment gateway operational, and the fastest solution is to open another account with a 3rd-party provider, even if that means paying higher processing fees or having a longer payout schedule for your settlements. Also, consider adding ACH to your checkout for lower cost and having an alternative payment method.
3rd parties are quick to approve and get you set up fast. Getting a more appropriate payment processing solution can take a week or longer, which is a lot of time to waste in wait. A 3rd party will get your cart working so you can accept debit and credit card payments and keep your business going while you apply for more direct solutions. As a business owner, your primary goal is to ensure your ecommerce business can remain profitable and continue to accept credit card payments.
You can try reapplying with Stripe, use PayPal, or find another option—there are tons of 3rd-party processors out there. These platforms are a great first step for startups and small business owners who don’t have processing history yet, helping to get set up fast and building history. This will ensure your cashflow is not affected by waiting for Stripe to reverse their cancellation decision.
Apply to 3 Merchant Account Providers
Not 3rd-party providers like Stripe or PayPal, but 3 high-risk merchant account providers like DirectPayNet. Providers like us are an ideal solution moving forward because we understand your high-risk business, the risks associated with it, and how to get you set up for the long run.
Why 3 merchant accounts? Because there’s no guarantee that you’ll be approved. If you only apply to one, wait the week or so it takes for your application to be reviewed, and then get denied, your e-commerce store will be non-function for even longer. Now you have to do the process again and keep waiting. It’s not a good strategy when you’re trying to keep business moving.
This is important: do not apply to 3 providers that use the same bank or acquirer. Payment processing providers like us work with many banks to get you a merchant account. Make sure the bank we present to you is not the same bank another merchant services provider presents to you. When you’re presented with a bank by one team, notify the other 2 that you have been presented this one bank and therefore would like to use a different bank if possible.
Prepare an Application Package When Looking for Providers
There are a few documents and items that every payment solutions provider requests. It’s in your best interest to keep all of these documents in a folder, ready to send along to speed up the process.
What you’ll need:
- Voided check or bank letter – confirms where your funds will be deposited
- Previous processing history – download this from Stripe as soon as possible, but make sure it’s an actual statement (PDF format), not a CSV file
- Bank statements – have at least 3 bank account statements ready, one for each of the past 3 months that shows account balance and transaction history. Also, it shows your account balance which can help the application if there is positive cash flow
- Business info cheat sheet – makes it easier for processors to get at-a-glance info about your business so they can decide if your business model is supported or not in the first place
The cheat sheet speeds up the approval (or denial) process by giving providers a quick summary of your business. This way, if there is no question that they don’t support your business model, then they can deny you faster and you won’t have spent so much time applying. The cheat sheet is one single page and says what you’re selling, how you’re selling it, what type of pricing you offer, and who you’re selling it to (in the world). Therefore, you should include login info for a member’s area, a pricing breakdown if you sell a lot of products or have monthly packages, and a brief overview of your business including which currencies you require in case you need more than USD.
Again, the application package is no more than a page and should be saved in a folder that’s readily accessible. The processor might request additional information later on, but the list above makes up the essential items you need to have on-hand.
Don’t Worry About the Technical Stuff
We understand that you want your payment processing provider to work seamlessly with your cart. For example, if your store is run on Shopify, it makes sense that the payment gateway you work with connects with your cart.
There is always a solution out there, so stop focusing on compatibility and start focusing on getting a payment provider that meets your needs. If the payment solution that works best for you doesn’t seamlessly integrate into your store’s platform, we guarantee there is a 3rd-party plugin, API, or zap that will make it work. Worry more about what payment methods your store needs to accept, like debit and credit cards on popular networks like Visa and MasterCard as well as ACH, and find a processing company that can provide them.
Most payment providers will help you with this, so focus more on getting your shop going and less on the technical aspects of it.
Side note: you also don’t have to worry about subscriptions. Subscriptions can be exported by another gateway, so there’s no risk in losing subscription revenue.
What to Do When All Else Fails
If you’ve been match-listed (put on a blacklist) and cannot use Stripe, you’re not being approved by any of the merchant account providers you’ve applied to, or you’ve gone too high on your chargebacks and no one is willing to approve you, there’s still a solution. Have a licensing agreement ready.
Create a licensing agreement for your products, content, and services for affiliates to resell for you. If you have potential business partners, ventures, or affiliates, now is the time to use them. It’s not the most elegant solution and you’ll have to give them a cut (say, 80/20), but this is the last-resort option you have.
If Stripe Is Holding Funds from You, DirectPayNet Is More Than Willing to Help.
For more info about what to do if Stripe is holding your funds, have a listen to my podcast episode discussing this in more detail on Youtube or Audio version for Apple podcast or Spotify. Click on the links to listen in!