Stripe is notorious for holding funds from merchants. As soon as you start scaling, when your business is going well and the road ahead looks smooth, BAM you sign into your Stripe account and see funds on hold.

No notification, no email. Nothing. Just frozen funds and a feeling of dread. The amount varies, too.

So, here’s what it means when Stripe holds funds and what to do to secure your business in just 2 steps.

First: Why is Stripe holding funds?

Stripe holds funds in accordance with their services agreement. You can read Stripe’s terms on their website, but it is very long and very unfriendly to anyone who isn’t a lawyer or payments expert. Stripe typically reserves funds to protect against any type of fraudulent activity and unexpected charges that may occur when businesses raise red flags.

Online Businesses Are High-Risk Businesses, Period

Whether you know it or not, as an ecommerce business owner you are high-risk (most likely, anyway). Most online business models are high-risk, and high-risk businesses are not supported by Stripe. Therefore, they are not able to use Stripe.com’s payment services. High risk means there is a higher risk of chargebacks and fraud.

Some common high-risk business types and business models include:

• Subscription services
• Digital products
• Dropshipping
• Coaching, teaching, consulting
• CBD, pharmaceuticals, nutraceuticals
• SaaS
• Marketing services

The trick is that Stripe approves every business that applies initially without performing any due diligence. That is until that business starts selling around $20k/month.

This makes Stripe nervous. As a payment aggregator, they don’t give you a merchant account with which you can scale your business, instead they allow Stripe users to operate under their own merchant account. So as soon as you do start scaling, it becomes time for them to transition the risk away from their own merchant account and into your own, which means putting your business on hold while they figure out the next steps.

Funds Are Held as a Security Measure

The funds held are to protect Stripe from having to pay fees and reimbursements on your behalf. It’s a pool of funds that covers things like returns, refunds, and chargebacks.

They won’t hold all of your funds, but they will hold 20% – 30%. But we get it; it sucks and it’s scary to not be able to receive your well-deserved payouts.

Withheld funds harming your business? Get better payment processing here!

How to Get Your Money Back from Stripe Holding Funds

It can be difficult to get your funds back from Stripe depending on your situation. The payments giant won’t tell you why your funds are withheld nor give you a timeline for when you can receive them.

Legally, however, they are only able to hold funds for 180 days.

This post today is specifically for merchants who can still operate their store using Stripe but have a percentage of their funds withheld. If all of your funds are frozen or your shop is shut down, you can find answers here and here.

When your shop is still operational and a portion of your Stripe account balance is frozen, then the following 3 steps are what you need to do to get that money back.

Step 1: Find an Alternative Payment Processor

Yes, we know how this sounds. But before you start emailing Stripe and calling lawyers and whatnot, you need to get something set up that will support your business.

Your best option would be to open a merchant account for your business. At least start the process. While that’s under way, you can open an account with PayPal or Square. Be warned: using PayPal and other alternatives to Stripe like that will lead you down this same road—they will all freeze funds, shut down your account, and create problems for you in the future.

Step 2: Request Your Funds BEFORE the Release Date

Stripe will notify you of the proposed payout schedule of your withheld funds in the email or letter that you’ve received.

DO NOT WAIT UNTIL THAT DATE TO TAKE ACTION!

It will only hurt you if you wait that long. Instead, you need to contact Stripe support. They have no customer support team phone number and using their online chat or support email won’t get you anywhere.

Send a physical letter to:

354 Oyster Point Boulevard

South San Francisco, CA 94080

This is the mailing address for Stripe’s US office. Send it through a paid certified letter and require a signature as well as add tracking. This way, you know where in the country it is, when it has arrived, and who received it.

The letter should be made on a professional letterhead and contain the following information:

• account details
• business name

• business address
• account number
• your name
• your address
• how much money they are holding
• when they told you it would be released
• ways you’ve tried to get in touch with them
• lack of responses to multiple inquiries (if applicable)

If you’re sending this before the proposed release date, request 50% of the funds. If after, request 100% of the funds.

Do not write an emotionally-charged letter. Keep the emotions out. Get it all out of your system first, then write the letter in a professional manner. Explain that your business and employees are in jeopardy due to this hold, so immediate action is necessary.

Sign it in wet ink.

Scan, copy, and email this letter to: [email protected].

What can I do to stop Stripe from holding funds again?

We have 3 easy steps for you to ensure that Stripe can NEVER hold money from you again. These steps are something you should follow, anyway, but if Stripe has already gotten a hold of your account then you need to ACT NOW.

1. If Stripe Has a Temporary Hold on Your Money…

open a backup processor account. We know we said this before, but it is the first step in every scenario.

Stripe is holding your money temporarily for now. In the future, it won’t be temporary. It will lead to your gateway being inaccessible, your store getting shut down, and your small business destroyed. We’ve seen it happen before. Act now before Stripe takes another step closer to ruining your business.

Finding another credit card processor is the most important thing you can do right now. Any processor will do, as long as you open it ASAP. DirectPayNet can help, it’s what we do best. But if you’re looking for something quick (as in a temporary solution), you can open another aggregator account.

This is a warning, DO NOT continue operating as if nothing has happened.

2. When Opening a Backup Account…

…don’t let it sit there, empty. You need to put some of your sales volume into the new payment processing account. Even just 20%.

The account needs to be put to work, plus it looks good to have credit card processing history with multiple processors. You want those bank statements to look full so when you start up a new business in the future or want to negotiate processing fees, you’ll have some leverage.

You can be smart about what you put through your second processor. Some of the red flags Stripe looks for include:

• high order values
• overseas orders
• too many orders in a small amount of time

You could set up your backup account to only handle big-ticket items or order values over $900. You could set one up to be solely for foreign transactions so it doesn’t handle anything in USD. You can have it activated only for Visa shoppers, or ACH, debit cards, or any other payment method. There are limitless options. But pick a path and stick to it.

3. Transferring Your Customer Data to a New Processor…

…can be done easily by contacting Stripe and asking them to send it to the new processor. Note that they will never send you the data, they will always send it to the other processor.

Customer data is tokenized, so for Stripe they are called Stripe Tokens. But that tokenized data can be used with any processor. They can’t send that data unencrypted to you because it contains sensitive credit card payment information, account information, and more. It’s just part of being compliant.

This is how you can preserve important customer data without asking them to reenter their information for things like saved shipping addresses or subscriptions.

Bonus! Customer Data Doesn’t Have to Be Stored with the Processor…

…you can use a vault instead. Tokenized customer data is always stored in a vault, but most of the time business owners don’t realize it and they use 1st-party vaults. For example, a Stripe Token is held in the vault built and maintained by Stripe. Your new processing company and gateway will also have a vault where that data is stored.

BUT you could use a 3rd-party vault and keep that data outside of those processors. The benefit would be that you don’t have to worry about losing the data or corrupting it when transferring to new processors. It would always be in your hands and under your control.

Never get your funds held by Stripe again!

Stripe payment processing might be easy to sign up for, but it’s not so easy to keep a business running on.

Get a PCI-compliant payment processor and payment gateway now through DirectPayNet. We connect you with a payment provider that works for your business—no hidden fees or threats. Just a processor and a gateway that work exactly how you need it with all the functionality that will take your business to new heights.

Speak with us today to open your own, real merchant account.