Stripe Holding Funds- What to Do About It

Stripe is one of the largest e-commerce payment processors that operate in the U.S. and elsewhere. Not only does the company offer business solutions in the form of payment processing, but they also make APIs available to their clientele. As one of dozens of such companies currently in operation, Stripe is part of the huge payment processing marketplace. Millions of e-commerce sellers turn to companies like Stripe to rapidly, legally, and efficiently transfer money from buyers to sellers.

Given the popularity of Stripe and its many competitors, the growth of cashless transactions is growing at a rapid rate. Some predict that not only e-commerce but brick-and-mortar service and goods sellers will operate in a mostly cashless environment within a generation. But there are plenty of bugs that need to be worked out, primarily the emerging problem of withheld funds.

According to contracts between Stripe and merchants, funds can be withheld in several different ways, including a temporary hold, an account termination, and an account freeze. The most common way is a temporary hold, in which merchants are informed that a portion of their funds are being held in abeyance of some further action. That action is typically a demand for certain types of documentation from the merchant. Until the documents are forthcoming, the funds are held.

Of course, there are dozens of other reasons that funds are withheld. The main goal for merchants is to get the money unencumbered.

How To Release Your Withheld Funds

There’s no sure-fire method for freeing up your withheld funds, but many merchants have had success with some techniques. Here are some of the common ways that e-commerce sellers have released their Stripe funds:

  • Do not contact the payment processor’s customer service department with the intent of complaining. Do call the customer service department to ask for help with finding out whom you should speak with about the account freeze or withheld funds.
  • Listen carefully to what the processor’s agent tells you about the situation. In the vast majority of cases, they will ask you for documentation that could include bank statements. If you want to unfreeze the funds, provide the documents as quickly as possible.
  • If your funds are released, be certain to speak with the processor’s agent and find out what you must do to prevent a recurrence of the situation.
  • If your funds are going to be frozen for a long time, consider obtaining a bridge loan, a working capital loan, or a credit line from your bank to hold you over in the meantime.
  • If your account is terminated, you will need to either switch to an all-cash business (not a viable solution for most merchants) or find a new processor. However, your rates could be considerably higher and/or your only recourse could be to a high-risk processing company.

An Ounce of Prevention is Worth a Pound of Cure

It’s one thing to fight the battle of releasing your withheld funds. But, wouldn’t it be good if you could prevent the situation from occurring in the first place? There are several strategies for doing so. Here is a brief look at several of the most popular ones:

  • Communicate with your payment processor: It’s essential to keep an open line of communication with your payment processor. Especially in the beginning, it helps to understand all the fine-print of contracts, notify the processor of any changes in products or services offered, and any other relevant change in the way you do business. This prevents all sorts of disputes and misunderstandings between you and them.
  • Work to keep fraud to a minimum: Any kind of fraudulent transaction can set off an alert on the processor’s side of the relationship. That’s why it’s imperative to take every precaution to only sell in markets and to customers who have no history of financially fraudulent activity. This can be difficult to do in new markets, especially international ones. But as long as your company does everything in its power to minimize fraud, and documents those efforts, you’ll be at an advantage if you ever need to dispute an attempt to withhold funds.
  • Maintain detailed documentation: There is no substitute for detailed, accurate documentation of every business decision you make that affects the way payments are processed, received, charged, or recorded. You can’t rely on the payment processor to keep records for you. Of course, they’ll provide you with regular statements, but you need to check them for accuracy against your own.
  • Keep an eye on charge-backs: Any change in the level of charge-banks serves as a major red flag to processors, and they’ll often set a reserve or flat-out hold on a portion of your funds. Be careful to only accept legitimate cards, deliver goods and services on time, and do whatever else you can to minimize charge-backs.
  • Avoid account mixing: Don’t use one business account for two businesses. This is one of the quickest ways to suffer a funds delay in the form of a hold, freeze, or reserve. It can be tempting, especially for small merchants who operate two or three small entities, to use the same processor account for all the companies under their control. Don’t do it. It only leads to the chance for delayed funds.
  • Stick to your original product/service list: Processors are wary of companies that begin selling new products without notice. When you sign a contract with a processor, you routinely list every product or service your company offers. If there’s a change, you’re supposed to notify the payment processor in advance. If you don’t, they’ll become suspicious and can withhold your funds.
  • Avoid major fluctuations of income: It doesn’t seem to make good business sense, but if you experience rapid changes in income, especially large increases within a short time period, processors will often withhold your funds or freeze your account until they can figure out what’s going on. They’ll likely demand documentation from you, which could mean a delay of weeks or months.

Payment Technologies Make a Difference

Stripe is one of the nation’s biggest providers of APIs and payment processing software. As such, it plays an integral role in making sure merchants have a smooth experience with receipt of their payments from customers. Sometimes, Stripe withholds funds from merchants for various reasons. It’s important to understand that merchants sign a service with Stripe that allows for such interruptions in cash flow. But even though the contract clearly states the fact that Stripe can freeze, delay, hold, or even deny funds to merchants for dozens of reasons, the point has caused a good deal of animosity between many merchants and Stripe.

Business owners who want to explore efficient, no-hassle ways to receive payment from customers can utilize any of the various services available at Metro Payment Technologies. Feel free to phone us at 1-800-771-3719 or send us an email message at When you’re ready for e-commerce solutions, terminals of any kind, POS systems, e-check processing, and anything else that makes your company’s payment technology run more smoothly, check out our website and begin to explore how to turn your e-commerce business into a more successful one.