When Stripe Becomes a Liability – The Limits of Processing Transactions - DirectPayNet

When Stripe Becomes a Liability – The Limits of Processing Transactions

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Stripe is easily one of the world’s go-to solutions for online payments. Customers know the payment gateway, merchant’s get a simple signup and fast activation, and both sides can benefit from Stripe’s security. But there’s a downside to using Stripe: payment processing limits.

Depending on your industry and how much you process, you could fall victim to Stripe’s strict shutdown measures that sees online businesses close at the snap of a finger with little to no notice. Follow along for guidance around this issue, whether you want to continue using Stripe or find another service altogether.

Clarifying the Confusion Around Stripe’s Processing Limits

Taking a look at Stripe’s payment doc, their official minimum and maximum in USD are $0.50 and $999,999.99, respectively. But we certainly know they won’t be accepting a near-million-dollar single transaction. So what will they accept, and why does their official documentation give that exact number?

The stated maximum is basically a technical limitation. It’s not meant to imply people are purchasing products at that price. Rather, it’s that they can purchase products at that price if the payment processor allows it. And I know what you’re thinking: “isn’t Stripe the payment processor?”

Stripe is a payment aggregator, not a payment processor. It basically allows businesses to operate within its own MID and rearranges them as they grow, connecting them to payment processors that can handle their transaction volume. Stripe aggregates several payment processors, just like how you can use several payment processors for your business.

Stripe doesn’t outright set a volume limit, but there is one that hovers around $25k per month. However, for some businesses that limit might be $10k and others might be $50k or $100k. If you’re a new business like a startup or someone who’s just getting started with Stripe, the limit is lower. If you’ve been using Stripe.com for a while and can back up your trustworthiness as merchant (i.e., operate at a low risk), then your transaction limit will be higher. Everyone in between is around $25k.

To answer the question of, “Does Stripe allow merchants to process an unlimited amount per month?”, the answer is no. That’s true for monetary volume and for transaction volume or line items. Higher-ticket transactions are high risk, but a lot of low-ticket items can also be high risk.

What Happens When You Breach the Processing Limit

When you go over the Stripe processing limit, of which they won’t tell you until you’ve breached it, a lot of not-good processes start taking effect. You lose sales and customers, funds are withheld, and accounts are frozen or even terminated. Refunds, payouts, and processing fees are also a bane for merchants using the Stripe API.

Businesses Affected Most by the Limit

Some businesses are inherently labeled “high risk”. Those include startups, dropshippers, subscription sellers, supplement stores, digital download merchants, and more. With these business types, there are pros and cons about using Stripe. The pro comes down to ease-of-use—new customers can sign up and start processing almost instantly without going through the underwriting process. The con is that once you do start making money, Stripe notices you and shuts down you store because they don’t allow high-risk businesses to operate using their service. That’s the importance of $25k, because at that value Stripe will start to notice you.

How You Know When You’ve Passed the Limit

All merchants, whether high-risk or not, are negatively affected by the processing limitation. Once any small business passes the limit set for their sub-merchant account, the owner gets an email. That email will tell you that credit card processing (on all networks–Visa, Mastercard, etc.) is halted for the next business day (maybe 3 days).

There is no warning that it’s about to happen, it’s a notification that it did happen. Many merchants who use Stripe or any other aggregator like PayPal and Square name this as their #1 complaint.

What Really Happens When You Go Over Stripe’s Processing Limit

Keep in mind that the above is for one transaction over the limit. So when Stripe reinstates your processing ability, there’s nothing stopping a customer from making a purchase which will, of course, push you further over the limit. Here, there are two paths that you can go down (both decided by Stripe).

The first path is that your funds are held and frozen for up to 9 months. Yes, nine months. Usually, account termination follows with no notice and it’s a process in-and-of itself to get those funds back. They can instantly decide not to approve your business, even if you’ve been operating safely for months. This is because you haven’t actually been approved when you signed up in the first place, which leads into the second path.

The second path can be viewed as either good or bad, depending on your own perspective and how badly you want to work with Stripe. Once you reach the $25k cap, Stripe can start the underwriting process if they decide to support your business.

Something to note: Stripe has regular reviews as your business scales which they use to suspend processing until they decide to accept your business.

Okay, going through this process sounds like a good thing because you haven’t been shut down. And on the surface, it is. If you really want to continue using Stripe and you feel it’s the best, most convenient service for you and your customers, then that’s great. Keep going. But the underwriting processing is the same as what’s required when you apply for a merchant account.

When applying for a merchant account, you can negotiate bank account and processor rates, eventually getting terms that really benefit you. With Stripe, you just get the same flat rate and monthly fees you’ve been operating with since the beginning with no added benefits and no guarantee that they won’t shut you down in the future. Again, Stripe has regular reviews and can suspend your account as they please.

Ticket Sizes That Get a Red Flag

You may know by now that Stripe doesn’t like high-ticket items. Maybe you read it in one of our posts or you’ve had an encounter with Stripe that solidifies the fact. Stripe also doesn’t explicitly mention what singular price is bad for one item.

From our own experiences with clients, and research, anything above $500 for a single product is considered high-ticket on Stripe. But that also doesn’t mean that you’ll instantly get frozen if you sell something at $500. It depends on your business, processing history, and how much you’ve scaled over the months or years on their platform.

What is a definitely “no” is $2500. Feel free to explore pricing for products and packages, but if you see that you’re approaching $2500, then consider breaking that package up into smaller ticket items so you don’t run into trouble.

The Best Way to Use Stripe, Considering Processing Limits

There are two solid ways to use Stripe, whether you want to keep them as a permanent payment solution or temporary.

Scale Slowly

You can’t instantly do $100k per month, but you could reach that volume eventually. Stripe makes money when you sell things, so of course they want merchants to sell more so they can make more. But diving in head-first with $100k in sales is not going to fly well. It’s way too risky. Instead, scale slowly. Contact Stripe’s customer service representatives about your account and let them know your goals and how you’d like to process more without being flagged. Follow their rules and you’ll get to a point where Stripe supports you no matter how large your business gets.

Use Stripe as a Backup

The best real solution for merchants is to use Stripe as a backup or to gain transaction history when they’re just starting up, have bad credit, or a recent merchant account termination. Stripe is incredibly easy to start using because they don’t underwrite you until you reach a certain point. If you stay under the radar and keep transactions below the cap, then you can gather a few months of transaction history to use in your favor when applying for a merchant account. And when you do apply for a merchant account outside of Stripe, you don’t have to terminate the Stripe account. Instead, keep it and use it as a backup option just in case. It doesn’t cost you anything and can easily be switched over to if push comes to shove.

You can configure merchant accounts to provide customers with more payment options than Stripe. You can accept credit card payments, debit card transactions, ACH payments, and other payment methods that fit you and your customers’ needs. Payment aggregators typically promote their customer-friendly card readers, but merchant account providers can also give businesses POS devices that operate in the same way. Many of Stripe’s benefits can be met by other solutions.

Avoid the Limitations of Stripe. Get a Merchant Account That Scales with You.

Merchant accounts are a long-term solution for any serious e-commerce business owner who’s looking to scale, slow or fast. DirectPayNet’s expert account service reps are on the line and ready to get your business up and running with API that provides a user-friendly shopping cart, payment gateway, chargeback protection, and processor whose terms you can get on board with.

Contact us today to start doing business without hidden volume caps, transaction fees, and risk of termination.

About the author

As President of DirectPayNet, I make it my mission to help merchants find the best payment solutions for their online business, especially if they are categorized as high-risk merchants. I help setup localized payments modes and have tons of other tricks to increase sales! Prior to starting DirectPayNet, I was a Director at MANSEF Inc. (now known as MindGeek), where I led a team dedicated to managing merchant accounts for hundreds of product lines as well as customer service and secondary revenue sources. I am an avid traveler, conference speaker and love to attend any event that allows me to learn about technology. I am fascinated by anything related to digital currency especially Bitcoin and the Blockchain.


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