“Stripe Froze My Account” & Other Nutra Seller Payment Problems
Sep 30, 2020 8-MINUTES
One of the biggest issues supplement merchants have is when they write us saying “Stripe froze my account.”
If you’re operating in the nutraceuticals industry, you should be concerned. Account freezes happen frequently.
Imagine waking up one day to this message … “Unfortunately, your business can’t use Stripe because it doesn’t meet our terms of service.”
Maybe you’ve been a faithful client of Stripe for months. Perhaps you grew your supplements store to $20,000 a month, diligently – you thought – adhering to their terms.
And then … boom.
Suddenly, payments cannot be collected. Stripe was your only payment processor. With it disabled, your e-commerce business is halted. And, revenue is no longer wired to your bank account. You’re now left scrambling to find an alternative payment method quickly to maintain your online business.
Sadly, that’s been the reality of many nutraceutical sellers, especially in the past few months.
So, our advice to you is this – get out now when you can plan your exit strategy. Or, wait to be thrown out when you have no contingencies in place.
Stripe froze my account. Why?
Simply put, Stripe is not a fan of nutraceuticals. In fact, neither is Shopify, and PayPal (in some cases). They do not support supplements, nootropics, and similar products that aren’t outright FDA-approved pharmaceuticals.
So, why would sellers continue using the payment platform?
We know that the low transaction fees are attractive. The flat rate of 2.9% + $0.30 per successful card charge for volumes under $1 million per year is pretty tempting. Those low rates are extremely enticing.
But those rates are low because payment aggregators like Stripe cater to low-risk businesses. And they tell you that quite clearly on their Stripe Restricted Businesses page. Pseudo pharmaceuticals (of which nutraceuticals are the first noted) are not supported.
Now you may say that the FDA has verified your nutraceutical products. But you can still face the possibility of a disabled or suspended Stripe account. Some of the small infractions would not even raise a flag on some conservative merchant processing companies, much less a high risk one.
So, despite verification by the FDA (and we know most nutra merchants have not gone that far), you can end up with a suspended Stripe account for the smallest of reasons.
Here are just a few which you can easily encounter just because you’re a business that accepts online payments.
Simple reasons for a suspended Stripe account.
Single product supplement site offer. You may have a store with a variety of other products, but add one supplement to your inventory, and you could lose your entire account.
Three or four chargebacks. This may not necessarily equate to a chargeback rate of 1% from Visa, Mastercard and other card networks. But payment aggregators can set higher standards if they want. So, chargebacks from customer disputes could be a deal-breaker.
Poor anti-fraud filters. Most payment service aggregators may not have as stringent anti-fraud prevention or detection tools as you can integrate with an independent payment processing system. You operate in a high-risk industry. Thus, you’re naturally more targeted for fraud by cardholders. Without better fraud protection tools, you can face a high chargeback ratio. Catch-22.
Other issues with Stripe accounts
- Holding payments for as long as 14 days. While the typical payout for new Stripe accounts is seven days. But, Stripe can choose to hold your funds for up to 14 days depending on your business model.
- Reserve funds requirements of up to 20%. Stripe has a high reserve fund requirement to address disputes and refunds. Now while they are often temporary, a temporary hold on 20% of your earnings can seriously hamper early cash flow.
Problems getting products accepted. As one Redditor noted, his client has an 8-figure store for which he processes payments with Stripe via Shopify. Even then, he was having problems adding other products to his store.
- No chargeback disputes. With a merchant account, you have mechanisms in place to dispute chargebacks, especially of the friendly-fraud kind. With payment aggregators, this is often not possible.
Another Redditor commented on a thread regarding “Stripe banned me for selling supplements” … “Sadly a lot of these processors are one chancers … so if you lose it you lose it forever.”
And that is most accurate.
Some small businesses are told their account is “suspended.” Others hear their accounts are “disabled.” Often, this isn’t a temporary situation. It’s permanent. Once you lose your Stripe account, it’s hard to get a new one. A lot of entrepreneurs struggle getting in touch with customer support in an effort to get their account re-enabled.
And as most online complaints show that Stripe support is very unresponsive when it comes to suspended or terminated accounts.
Now we’ve long declared services like Stripe to be problematic for high-risk merchants. In fact, if you review the Stripe Better Business Bureau page, you’ll notice that most of the negative customer reviews relate to suspended Stripe accounts without warning. The rest deal with some of the problems we outlined above. The negative reviews on Trust Pilot also address similar concerns.
So, what’s the alternative?
Supplement offers need a robust payment solution
DirectPayNet helps high-risk business owners affected by Stripe to find better payment gateway alternatives.
Without a reliable long-term payment solution that supports your nutraceutical offer, it will be difficult to scale. And if Stripe has terminated your account and labeled you high-risk, it’s time to pivot.
Now, before you go off searching for a high-risk merchant account, you need to do some internal checks first. Remember that nutra offers are subject to declines for payment processing. It doesn’t matter if you have history from Stripe, Shopify, or even a high-risk merchant account provider.
So, make sure you aren’t making any of these following mistakes that could lead to your application for a merchant account still being declined.
- Making health claims that are unverified by a regulatory body such as the FDA.
- Products with ingredients or substances banned in your target market.
- Incomplete labels or failure to list ingredients in a text format on your website.
- Poor payment processing history (or where there is no history, poor credit rating for the primary applicant).
Contact one of our team members in the next 24 hours to find out your options post-Stripe.
What to do about preventing a suspended stripe account?
Or if you want to set up your nutraceutical business on the best footing.
1. Avoid getting your current Stripe account suspended
Now, if you didn’t realize all the implications of running a nutraceutical business on Stripe, then here’s what you can do right now.
If you currently have a Stripe or Shopify account, do everything you can to prevent a shut down and keep it going until you have an alternative. Some options available to you now include:
Keeping chargebacks low
This can seem like a difficult feat. We know chargeback fraud is worsening during this pandemic due to desperate scammers. But be clear on your brand’s benefits, terms and cost of your offer. Also, don’t give misleading information to your customers. Always maintain a low to no chargeback ratio. Make your policies clear and offer refunds to limit scams.
Staying out of sight … as much as is possible
Be careful of the product titles and descriptions that you use. This could cause your business to be flagged for review and end up with a suspended Stripe account (as one Redditor encountered).
Keep sales steady. Any irregular spikes may prompt a review of your account. By avoiding a suspension of your Stripe account, you can continue business as usual as you seek out and implement additional payment methods in the event of a problem.
Watching your marketing
You can sell more products/supplements that often never given a second look. It’s about how you market the item for sale.
For example, if presented in the right way, a supplement product supporting nootropics brain enhancement or libido function can actually be approved for credit card processing. Weight loss pills (especially from new merchants) are not well-liked by processors. But more merchant service providers are approving keto and adrenal fatigue products.
This is not to say that you’ll be providing misleading information. If you don’t make your own supplements, then ensure to source from manufacturers that use current good manufacturing processes (cGMP). And that they do appropriate testing.
2. Apply for a high-risk merchant account
While you maintain your Stripe account, get ready to apply for a merchant account, especially one meant for high-risk card transactions.
To start, you need good processing history (little to no chargebacks + good monthly sales like $20K and above). This is vital to get an account to scale your brand and process more sales (e.g. $100K per month). You can even be in a position to negotiate rolling reserves to as low as 5% or even none at all.
You need to pass Know Your Customer (KYC) and other compliance requirements from the underwriting departments of acquiring banks and other payment providers. Our blog carries a few posts on how to prepare when applying for a high-risk merchant account. But it also helps to have a knowledgeable merchant services provider assist with the process.
As a high-risk merchant, being unable to accept credit card, debit card, and ACH payments is basically a death knell to your business. And if you’re only using Stripe for payment processing, you’re the one sounding the bell.
Supplement sellers generally avoid merchant accounts because of high fees associated with them. Some merchant processors will gouge you if they think you have no alternative.
But high charges do not have to be your reality. If you have a suspended Stripe account, it’s not the end.
DirectPayNet will work to get your new payment setup approved. We look for and pair you with solutions that integrate with your checkout. This will ensure you get back up and accepting payments in no time, without interruptions.
Email the DirectPayNet team today and let us help you secure a more robust payment processing service.