Stripe holds funds or pauses payouts for millions of online businesses each year, creating unexpected cash flow challenges that can disrupt operations and growth. If you’ve logged into your Stripe dashboard to find your expected payout delayed or your account balance frozen, you’re not alone—and more importantly, you’re not without options.
Payment holds occur when Stripe’s risk algorithms detect unusual activity, disputed transactions, or compliance concerns that require additional review. While these holds serve to protect both merchants and customers from fraud, they can leave business owners frustrated and searching for answers about when they’ll regain access to their revenue.
This comprehensive guide explains exactly why Stripe holds funds, how long these holds typically last, and the specific steps you can take to resolve them quickly. Whether you’re dealing with your first hold as a new merchant or managing recurring payout issues as an established business, you’ll learn how to navigate Stripe’s policies, reduce your risk profile, and maintain healthy cash flow. We’ll cover everything from initial account reserves to dispute-related holds, providing actionable strategies to prevent future interruptions and get your money flowing again.
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7 Reasons Why Stripe is Holding Funds
I see merchants facing Stripe holds every day, and understanding these triggers helps you avoid or prepare for the potential scenarios where Stripe holds a payment. Let’s dive into the specific reasons why Stripe pauses payouts, freezes accounts, and holds funds:
1. Missing Account Details
When you sign up for a Stripe account, you need to provide some essential information about your business. This includes things like your tax ID number, business address, and banking details.
Stripe uses this info to verify your identity and make sure you’re legit.
If you fail to provide any of these documents or if the information is inaccurate, Stripe will pause your payouts. They might ask for additional verification documents, like a copy of your driver’s license or a recent utility bill, to confirm that you are who you say you are.
It’s super important to keep your account information up to date and accurate. If Stripe requests any verification documents, make sure to provide them promptly. The longer you wait, the longer your payouts will be on hold, and that’s not good for business.
2. High Dispute, Return, and Chargeback Rates
Another major reason Stripe might pause your payouts is if your business has a high rate of disputes, returns, or chargebacks. Disputes happen when a customer questions a charge on their credit card statement and asks their bank to investigate.
Returns occur when a customer sends a product back for a refund. Chargebacks are similar to disputes, but they’re initiated by the cardholder’s bank.
If your business racks up too many disputes, returns, or chargebacks, Stripe sees this as a red flag. It could mean that there’s something fishy going on with your sales practices or that you’re not delivering on your promises to customers. As a result, Stripe may pause your payouts to protect themselves and their users from potential fraud or financial losses.
To avoid this situation, it’s important to maintain low rates of disputes, returns, and chargebacks. You can do this by being transparent about your products or services, providing excellent customer service, and promptly addressing any issues that arise.
It’s also a good idea to keep an eye on your chargeback ratio – that’s the percentage of transactions that result in a chargeback. Aim to keep this number below 1% to stay in Stripe’s good graces.
If you do experience a high volume of disputes or chargebacks, take action immediately. Reach out to your customers to resolve any misunderstandings and work with Stripe to provide evidence and fight fraudulent claims. The sooner you tackle the problem, the better your chances of getting your payouts reinstated.
In addition, Stripe’s algorithms constantly monitor for signs of fraudulent behavior. If they detect unusual patterns or transactions that violate their terms of service, they may freeze your funds pending further investigation.
3. Customer Complaint Patterns
Beyond chargebacks, Stripe monitors customer service issues. Multiple refund requests or customer complaints about your products or services can trigger a review and subsequent hold.
This applies even if the complaints haven’t escalated to formal disputes.
I always remind merchants that Stripe can hold funds for up to 180 days, particularly when they suspect potential risks. This makes understanding and avoiding these triggers crucial for maintaining healthy cash flow in your business.
4. Scaling Too Quickly
Every business dreams of rapid growth and success, but scaling too quickly without proper risk management can actually lead to paused payouts on Stripe. When your business experiences sudden spikes in transaction volume, it can trigger red flags in Stripe’s fraud detection system.
Rapid growth can strain your business’s resources and make it challenging to maintain the same level of customer service and order fulfillment. If you’re not prepared to handle the influx of sales, you may see an increase in customer complaints, disputes, and chargebacks. As we discussed earlier, high rates of these issues can lead to paused payouts.
To avoid this situation, it’s essential to have a solid risk management plan in place before you start scaling your business. This might include:
Gradually increasing your advertising spend and sales targets, rather than going all-in at once
Investing in customer service and support to handle increased demand
Implementing fraud prevention measures, like AVS and CVV checks, to weed out suspicious transactions
Regularly monitoring your chargeback ratio and addressing any issues promptly
Communicating with Stripe about your growth plans and working together to manage risk
MOST ONLINE BUSINESSES ARE HIGH RISK, LEARN MORE
5. Restricted or Prohibited Business Lists
Stripe maintains lists of restricted and prohibited businesses to ensure compliance with legal requirements and to manage risk on their platform. These lists outline the types of businesses and activities that are either completely prohibited from using Stripe or require additional scrutiny and approval before being allowed to process payments.
The Stripe prohibited business list includes categories that Stripe does not support under any circumstances due to legal or ethical concerns. Some examples of prohibited businesses include:
- Illegal products and services
- Adult content and services
- Debt relief and credit repair services
- Gambling and gaming
- Pharmaceuticals and supplements
- Weapons and explosives
Operating in a prohibited category can result in immediate account termination and loss of access to Stripe’s payment processing services, .
On the other hand, the Stripe restricted business list includes categories that may be allowed to use Stripe after undergoing additional review and receiving explicit approval. These businesses typically face heightened regulatory scrutiny or present increased financial risks. Examples of restricted businesses include:
- Crowdfunding and fundraising
- Financial services and money transfers
- Marijuana dispensaries (in jurisdictions where legally permitted)
- Subscription services
- Travel agencies and timeshares
To operate in a restricted category, businesses must provide detailed information about their operations and undergo a thorough vetting process. Stripe assesses factors such as the company’s compliance with applicable laws, its risk management practices, and its overall financial stability. These businesses may experience more frequent account reviews, requests for additional documentation, or even sudden account terminations.
All these categories are automatically considered high-risk, and running a Stripe high risk business comes with a lot more strings and hoops you must jump through to stay in their good graces.
Failing to disclose that your business falls under a restricted category or operating in a prohibited category can lead to severe consequences. Stripe may freeze your funds, terminate your account, and report your business to relevant authorities if necessary. This can result in significant financial losses and legal repercussions for your company.
GET A PROCESSOR THAT SCALES AS QUICKLY AS YOU DO
6. Foreign Merchants
Stripe’s global reach is impressive, but foreign merchants may still face unique challenges when using the platform. These hurdles can complicate the already complex process of running an international business.
One of the primary challenges foreign merchants encounter is navigating the different legal and regulatory requirements in their home countries. While Stripe strives to comply with global regulations, businesses are ultimately responsible for ensuring they adhere to local laws related to online transactions, data protection, and consumer rights.
Currency conversion is another potential obstacle for international businesses. Although Stripe supports transactions in over 135 currencies, there may be additional fees associated with converting funds to your local currency. These costs can add up over time and impact your bottom line. It’s crucial to factor in currency conversion fees when pricing your products or services and setting your budget.
Moreover, foreign merchants may be subject to additional verification requirements to comply with Stripe’s global anti-money laundering (AML) and know-your-customer (KYC) policies.
This enhanced due diligence process can involve providing extra documentation, such as proof of business registration, identification of beneficial owners, or information about your company’s source of funds.
The verification process can be time-consuming and may delay your ability to start processing payments. In some cases, Stripe might even request periodic updates to ensure ongoing compliance, adding an administrative burden to your operations.
While you likely won’t convert as much, it’s better in the long run to open a local Stripe account and convert the currency from yours to your target market. This is opposed to opening a Stripe account in your target market directly.
GET A MERCHANT ACCOUNT THAT TRULY BACKS YOUR BUSINESS
7. Statement Warnings
Before Stripe takes the drastic step of pausing your payouts, they often provide warning signs that your account is at risk. One of the most common indicators is a statement warning.
Statement warnings are notifications that appear on your Stripe dashboard or direct on your Stripe statement, alerting you to potential issues with your account. These warnings can range from minor concerns, like a sudden change in your sales volume, to more serious problems, like a high chargeback rate or suspicious transactions.
When you receive a statement warning, review the notification and understand the issue Stripe is flagging. Some common reasons for statement warnings include:
- Unusual transaction patterns or sudden spikes in sales volume
- High rates of disputes, refunds, or chargebacks
- Incomplete or outdated account information
- Selling products or services that fall under Stripe’s restricted or prohibited categories
The bad news is that when Stripe gives you a statement warning, your account is 9 times out of 10 shut down.
However, the information on the warning can tell you what type of merchant account to open. Or at the very least, it will tell you what to look out for in your merchant services provider.
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How Long Can Stripe Hold Your Funds?
Stripe can hold your funds for varying lengths of time, depending on the specific circumstances. Let’s break down the typical hold periods.
Initial Payout Schedule
When you first start processing payments with Stripe, they typically implement a standard payout schedule. This schedule can range from 2 to 7 days for most merchants, depending on your location and business type. During this initial period, Stripe assesses your account’s risk level and transaction patterns.
Extended Holds
In many cases, Stripe may extend the hold period up to 180 days. This extended hold usually occurs when Stripe suspects fraudulent activity or violations of their terms of service.
Account Freezes
If Stripe freezes your account, you may lose the ability to process transactions, withdraw funds, or both. The duration of an account freeze can vary widely, lasting until Stripe completes its investigation or you resolve the issues that led to the freeze.
Termination Holds
When Stripe terminates an account, they typically hold any remaining funds for 90 to 180 days. This hold allows Stripe to cover any potential chargebacks or disputes that may arise after account closure.
Rolling Reserves
In some instances, Stripe implements rolling reserves, where they hold a percentage of your transactions for a set period. These reserves can last anywhere from 30 to 90 days, depending on your account’s risk assessment.
Remember, Stripe reserves the right to change payout schedules or impose holds at any time following a risk review. While these holds can be frustrating, Stripe implements them to manage risk and comply with financial regulations.
OPEN A MERCHANT ACCOUNT THAT SUPPORTS YOUR BUSINESS
How do I Recover my Stripe Funds?
When Stripe holds your funds, don’t panic. Follow these actionable steps to recover your money and get your business back on track.
1. Send a Physical Letter
Start by sending a formal letter to Stripe’s legal department. Here’s how:
- Draft a clear, concise letter explaining your situation and requesting the release of your funds.
- Use certified mail with a return receipt and signature requirement to ensure Stripe receives your letter.
- Include relevant account details and documentation to support your case.
This physical letter establishes a paper trail and demonstrates your commitment to resolving the issue.
2. Follow Up with a Polite Email
After sending your letter, reach out via email:
- Compose a professional, courteous email to Stripe’s support team.
- Reference your physical letter and provide any additional context.
- Request the release of 50% of your held funds as a good faith measure.
Maintain a positive tone and express your willingness to cooperate with any necessary procedures.
3. Diversify Your Payment Processing
While working to recover your Stripe funds, take steps to protect your business:
- Open alternative payment processing accounts with services like PayPal or Shopify Payments.
- Open a high-risk merchant account for more stable, long-term processing.
4. Persist with Regular Follow-ups
Consistency is key in recovering your funds:
- Set a schedule to follow up with Stripe every 30 days.
- In each follow-up, request the release of an additional portion of your held funds.
- Provide updates on any changes or improvements you’ve made to address Stripe’s concerns.
5. Address Underlying Issues
While pursuing fund recovery, tackle any problems that led to the hold:
- Review and improve your chargeback prevention strategies.
- Enhance your customer service to reduce disputes.
- Implement stronger fraud prevention measures.
6. Consider Legal Assistance
If your efforts don’t yield results:
- Consult with a lawyer specializing in financial services or e-commerce law.
- Explore the possibility of legal action, but weigh this option carefully against potential costs and outcomes. ARE YOUR FUNDS FROZEN? GET HELP NOW
ARE YOUR FUNDS FROZEN? GET HELP NOW!
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.
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What are the Best Alternatives to Stripe?
While Stripe is a popular choice among online merchants, it’s not the only credit card payment processor available—and there are certainly safer options than Stripe.
If you’re considering exploring alternatives to Stripe, it’s essential to evaluate the pros and cons of each option to find the one that best fits your business needs. Let’s take a look at some factors to consider and alternative payment processors to Stripe:
Other Payment Service Options
There are several other payment processing companies that you can consider as alternatives to Stripe, each with its unique features, pricing structures, and policies. Some popular options include:
- PayPal: A widely-used payment processor that supports a vast range of currencies and countries. PayPal offers a variety of payment solutions for businesses of all sizes.
- Square: A user-friendly payment processor that focuses on seamless integration with point-of-sale systems, e-commerce platforms, and mobile payments.
- Braintree: A payment gateway owned by PayPal that offers advanced payment solutions for businesses, including fraud protection and customizable checkout experiences.
- Merchant Account: There are many merchant service providers—DirectPayNet being one of them. What we provide is a specified account designed solely for your business model, so you will never have to deal with surprise holds, freezes, or shut downs.
This is a good point to mention that Shopify Payments is the same payment provider as Stripe. So there is no need for you to consider this as an alternative.
Evaluate the Pros and Cons of Alternative Payment Processors
Before making a switch, carefully weigh the pros and cons of each payment processor. Consider factors such as:
- Pricing structure: Analyze the fees associated with each processor, including transaction fees, monthly fees, and any additional charges.
- Integration and compatibility: Determine how easily the payment processor can be integrated into your existing website, e-commerce platform, or point-of-sale system.
- Customer support: Assess the quality and availability of customer support, as this can be crucial when dealing with payment issues or fund holds.
- Payment methods: Choose a processor that supports the payment methods preferred by your customers, such as credit cards (e.g. Visa), ACH, debit cards, or direct bank account transfers.
- Scalability: Opt for a payment processor that can grow with your business, offering features and pricing structures that suit your needs as you expand.
