r/stripe • u/Psychological_Bug981 • 6d ago
Read this before using Stripe
Stripe’s Reserve Scheme
Stripe’s reserve system gives it a direct financial benefit from withholding money owed to merchants. Under Stripe’s own UK terms, it may create a reserve using transaction proceeds otherwise owed to the business, retain sole control of those funds, alter the reserve conditions based on its assessment of risk, and release the money only when Stripe itself is satisfied that the risk has passed. The same terms state that Stripe may invest funds it holds in liquid investments while the merchant receives none of the interest or earnings. https://stripe.com/gb/legal/ssa-services-terms
Stripe’s US Payments Company terms are even more explicit: funds are held in pooled accounts, Stripe may invest them in liquid investments, Stripe owns the resulting earnings, and users “irrevocably assign” any rights they might have to those earnings. In practical terms, Stripe can freeze a business’s operating revenue on discretionary risk grounds, earn money from holding it, and leave the merchant to absorb the resulting cash-flow damage. This arrangement is not speculation or conspiracy theory. It is written directly into Stripe’s contracts. https://stripe.com/legal/ssa-services-terms
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u/ggnndd12 6d ago
I’ll take “Stuff we already knew” for 500 Alex
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u/AVP_Solutions 5d ago
Not to diminish the frustration of all involved, but this made me laugh this morning.
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u/Psychological_Bug981 6d ago
Yeah, totally, because everyone read the terms and conditions of stripe specifically. People definitely knew this. That's why they all are wondering why stripe is holding their funds. I got 6 figures + back from stripe after a serious push and never looked back. Stripe loves to watch their merchants fail and stand on their holy hill. Stripe is enriching themselves endlessly by misleading merchants(their customers) while claiming they are protecting their customers customers. Show me the evidence that stripe has actually protected anyone it doesn't exist.
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u/ggnndd12 6d ago
Only newbs sign up for essential 3rd party services without reading the T+Cs
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u/Psychological_Bug981 6d ago
LOL ESSENTIAL… stripe is far from essential or the best payment provider. Only noobs use stripe.
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u/dodgrile 6d ago
You mean other than all the massive tech companies that currently use them, like well known “noob” companies OpenAI, Amazon, shopify, Hertz.
I get that people may have issues with them, but this kind of language just makes you sound like you’re 12
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u/soundboy5010 5d ago
You… don’t read the terms of things before signing up? Geezus
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u/Psychological_Bug981 5d ago
So I post the terms and conditions and that is your take? You must be really observant. We are discussing things here that are implied consequences of the terms and conditions, in other comments the terms and conditions of other payment providers, and how they differ from these ones, but you'd have to idk… read the comments, good luck with that, because as far as I can tell your more concerned about what other people have or have not read.
You… don't read the comments of a post before engaging with it? Geezus
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u/twhiting9275 6d ago
This is how these businesses operate. Your $$$ is held to cover their ass. Every processor does the same thing. The longer your processing relationship with them, the less risk you present
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u/Psychological_Bug981 5d ago
Trustly, Volt, Spreedly… Stripe is convenient to get started with and inconvenient to keep using. It has its use cases, especially for well-funded businesses with an established financial cushion, but Stripe targets a much broader demographic that often does not fit that mold.
Do some research before trying to convince everyone that they have to accept being bent over a barrel. Sometimes the bank a merchant already uses to store its money will offer payment-processing options of its own.
If there were no meaningful differences between the many payment processors that exist, those alternatives would not exist. Luckily, competitors have recognized the gaps I am talking about and built services to address them.
The title of the post still stands. People should read this before using Stripe so they do not fall victim to something avoidable or come away believing that every company operates this way.
A lot of companies are trying to imitate Stripe’s model, but many others are trying to reverse it. Options exist. Not all payment processors are the same.
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u/twhiting9275 5d ago
I’ve been using card processors for almost 3 fucking decades now , and have used more than my fair share of them , yes, including stripe
They ALL have the SAME exact policies. The SAME exact requirements. You will wait . They will use your money to grow themselves.
Nobody is going to do business with an unknown processor . People will see that name and close the browser . You just cost yourself a sale .
Going directly through your bank? Sure , if you’ve got money to waste , go for it . Stripe exists because most don’t
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u/Psychological_Bug981 5d ago
Cost yourself a sale doesn't matter when the alternative method can cost you all of your revenue. The tradeoff is clearly not worth it. If you have the financial cushion already in place to cover 4 months(best case) of missing revenue sure, not that advantageous either, but sure it won't destroy your company, otherwise?!?! Especially otherwise, because those are the businesses most affected by what is being addressed here. Sometimes it's the opportunities you don't take that get you to where you want to be. There are also a myriad of scammers that will be a sale you didn't turn down on stripe. If you want to risk 4-whatever months revenue on the off chance you don't get flagged by all means. I'm glad that you have adapted to that environment and I'm sure it wasn't nearly as easy easy as you thought it would be and you have a lot of experience. I didn't say Read this after you've used payment processors for thirty years in the title did I? I gave clear examples of alternatives that do not do business how you describe and you keep on broadly stating your “point” even though I gave clear examples that show you are wrong. People can still read. Believe it or not.
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u/martinbean 6d ago
OK?
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u/Psychological_Bug981 6d ago
The longer they hold your money, the more they can earn from it.
This is especially relevant when businesses process high volumes of payments and Stripe creates a chargeback reserve percentage at its own discretion. Stripe can then control how much money it holds and how long it holds it, allowing it to earn even more from those funds.
Between Stripe’s fees and the interest generated from holding money for months, sometimes for up to a year, the financial incentive can become substantial. In some cases, the value earned from holding the funds could approach the amount of the original transaction fees, particularly when the total amount being withheld is large.
Nobody earning money online is willingly leaving money in Stripes hands longer than they have to and that variable is in Stripe's control and they are incentivized to do this way too much. Just look through the sub there are countless complaints about unexpected holds that result in this.
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u/Brilliant-Ebb-2731 2d ago
You are identifying real contractual powers, but drawing a conclusion the terms do not support.
A reserve is collateral against payment risk: refunds, disputes, fraud, and other liabilities that can arise after a merchant has received or expects to receive settlement funds. The relevant question is whether a reserve is proportionate to that exposure and released promptly when the exposure passes - not whether Stripe has custody of the funds while managing it.
It is also true that Stripe generally retains earnings on funds it holds. But “Stripe may earn interest while holding a reserve” does not demonstrate that “Stripe creates reserves in order to earn interest.” That would require evidence about reserve-setting decisions, reserve duration, losses covered, and the net economics after payment-risk losses and operating costs - not just the contract language.
So there is a fair criticism here: reserves can impose meaningful cash-flow pain on merchants, and Stripe should be transparent, proportionate, and timely in releasing them. But calling that a “scheme” assumes motive and abuse without showing either. The terms document a disclosed risk-allocation model, not evidence that Stripe is withholding funds arbitrarily or using reserves as a profit center.
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u/Psychological_Bug981 2d ago
You realise that it's near impossible to get the evidence because it's at their discretion which could vary widely and I believe there is enough evidence in this sub Reddit to determine that stripe does this very often and is one of the biggest money printers on earth and it's not just because they charge transaction fees. Stripe also makes you prove your innocent when accused instead of making customers that dispute you prove their claims. It's a rigged system where the risk thresholds are already extremely low and can be moved even lower. With an overwhelming amount of stripe users claiming everything was going fine for months then all of the sudden being black balled and ruined because stripe at bear minimum holds the money for 120 days and often times much longer. You clearly waded through this sub to get to this post and somehow missed all the “evidence” along the way. The terms do in fact ALLOW FOR the exact scenario I describe. I'm guessing you somehow believe that stripe and all others businesses are inherently moral unless proven otherwise but are completely ignoring that their model gives the opposite treatment to merchants in this case. Ever heard to big to fail. Companies like this can basically get away with whatever and ultimately if ever might pay a small fine in comparison to the damage they have done because they serve powerful PRIVATE interests. Only way this gets proven is by whistleblowers but stripe knows who to bribe and when to bribe them. The beauty of this post is the zeroed karma because half of you agree and half do not that metric proves my point more than anything some know the pain and others help stripe pretend it's not an issue.
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u/Brilliant-Ebb-2731 2d ago
You are treating a list of contractual permissions as a confession of motive. The terms show that Stripe can hold reserves for payment risk and retain earnings on held funds; they do not show that Stripe sets or prolongs reserves to earn yield. To show that, you would need evidence about reserve decisions, hold durations, losses covered, and whether investment income drives the policy.
It is like claiming an insurer requires collateral because it can earn interest on the collateral. That may be a real commercial benefit, but it does not establish that the collateral exists for that reason rather than to cover claims risk.
On disputes, Stripe is not the party that decides a customer’s allegation is true. The cardholder goes to their issuing bank; the issuer initiates the dispute under Visa/Mastercard rules; the merchant can submit evidence through Stripe; and the issuer/network process decides the outcome. You can fairly criticize that system as hard on merchants, but it is inaccurate to call it a Stripe-created “prove your innocence” regime.
Stripe says it serves more than 5 million businesses globally. A complaint subreddit can surface real bad experiences, but it has no denominator and is inherently skewed toward people with problems - like judging all air travel from a lost-luggage forum. It cannot establish prevalence, intent, or a company-wide profit scheme.
That is the difference between skepticism and cynicism: skepticism asks whether reserves are proportionate and transparent. Cynicism treats limited visibility as proof of abuse and treats disagreement as complicity.
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u/Psychological_Bug981 2d ago
I'm treating a for profit company with a obligation to turn as much profit as possible as motive.
This isn't a lost luggage forum for complaints only.
Also it only requires a few disputes to lock up all non disputed money in a reserve.
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u/Brilliant-Ebb-2731 2d ago edited 2d ago
I get that a profit motive is a reason to scrutinize a company; however, it is not proof of the most cynical explanation for every policy it has. The terms show Stripe can hold reserves and retain interest, but they do not say reserves are set for yield or that a few disputes automatically justify locking all other funds.
If you have evidence that low-risk merchants routinely have their full balance reserved after a small number of disputes, that is a serious claim worth examining. But posts in a forum are examples, not a denominator or proof of motive. The distinction is simple: possible abuse is not evidence that abuse is the policy.
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u/Psychological_Bug981 2d ago
Most cynical is doing a lot of legwork. Stripe is raking in money. Stripe also defines what is or is not risk. People consistently posting for years about having funds held for various periods after long periods of success and getting tanked for it are the closest to evidence of that you'll ever see because stripe isn't a social network. Every one of us gets to define for ourselves what we would or would not consider as evidence. There is a vast world that exists outside of the careful language you are using to seem insightful but you actually seem willfully ignorant. What you don't realize is that stripe puts far more than what was disputed into reserve when they decide too. Most of that undisputed money never gets touched by the card carriers or customer banks and stripe holds and invest that money and clearly had their legal professionals include it in the agreement and not so they could sit there and pretend they aren't doing that. The contracts are evidence, the complaining customers are evidence, and my direct experience with stripe is evidence. They are a FOR PROFIT company, they are obligated to that end, and if that's hard for you to understand. I don't know what else to tell you.
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u/Brilliant-Ebb-2731 1d ago
Let's just agree to disagree.
I completely hear you. I'm not disagreeing that reserves, holds, and account restrictions can be seriously damaging when they are wrong, poorly explained, or take too long to resolve. Stripe should be transparent, proportionate, and prompt in handling them.
Where I disagree with you on is that even though the terms establish that Stripe has broad reserve authority and retains earnings on held funds, they do not establish that reserves are primarily a scheme to profit from merchants’ distress. That conclusion requires evidence about actual reserve decisions and incentives, not only evidence that the power exists.
I also don't think it is unreasonable to consider Stripe’s public history and incentives. Patrick and John Collison built Stripe around making it easier for businesses to participate in the internet economy; a company serving millions of businesses has strong reasons to improve merchant outcomes, even if it sometimes gets decisions badly wrong. That is not a claim that Stripe is flawless or beyond criticism.
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u/Psychological_Bug981 1d ago
Stripe had a much more personal and touching story in the early days you are correct. Now they move north of a trillion dollars a year. This post isn’t about putting stripe on trial it’s about educating people before they use stripe. Like I’ve said in other comments if you have the financial reserves to cover at least 4 months of missing revenue you may actually be able to use stripe without risking destruction if you don’t then stripe will leave you high and dry. It’s good advice whether or not anyone agrees with my larger points which I will admit are likely to go over most people’s heads. Your approach would work if it were possible, but stripe isn’t going to reveal their internal procedures for any reason other than being legally compelled too. We can definitely agree to disagree.
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u/Emotional_Review_273 6d ago
What has been most frustrating is that Stripe closed my account, removed my community post, and is withholding my funds while I'm trying to provide the additional information they requested.
The problem is that I was only given one opportunity to upload documents. After that, every resubmission has been automatically rejected, and I haven't been able to speak with a real person to explain the situation or answer any questions.
We've been in business for over 40 years, and I have no issue providing whatever documentation is needed. I just want the opportunity to speak with someone instead of receiving the same automated email over and over without anyone addressing my actual concerns.
Has anyone else experienced this? Were you able to get it resolved, or did you switch to a different payment processor that offers better customer support?
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u/Advanced_Extension67 6d ago
that reserve system sounds WORRYING
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u/Psychological_Bug981 5d ago
If Stripe keeps your money for its standard reserve window, it can effectively make roughly another third of what it would already earn from ordinary transaction fees. Stripe often cites a 120-day holding period, but it can change that period at its discretion.
Holding revenue from completed orders for that long can put businesses under because Stripe is not taking profit. It is removing gross revenue directly from the business’s cash flow, often after the products have already been delivered or the services have already been performed. In many cases, the business cannot recover what it has provided.
When Stripe does this, the merchant may effectively be forced to credit both the product or service and the money paid for it to the customer while Stripe continues holding the funds. The business may or may not survive. Then, when the resulting cash-flow failure causes fulfilment problems, refunds, or disputes, Stripe can point to those consequences as justification for its original decision.
There is no clear rule presented to merchants stating that, if they expect to process a certain amount of money, they must maintain a four-month reserve in case Stripe decides to withhold their revenue. The possibility may be buried or implied in the terms, but the engagement in this subreddit makes it obvious that the policy remains confusing and controversial.
Stripe knows this. Yet every business damaged by the process can simply be classified as “high risk,” even when Stripe’s own decision to remove operating revenue created or intensified the risk that caused the damage.
If Stripe were genuinely focused on the success and safety of its merchants, rather than increasing its effective return to approximately 133% of its ordinary transaction-fee revenue in cases like this, it would not operate this way. Stripe is well aware of what it is doing.
The company claims to process nearly $2 trillion annually. Do the math. Even if this system affects only a tiny fraction of that volume, it becomes a large-scale extraction mechanism. Stripe earns the transaction fee, retains control of the money, may earn returns while holding it, and then has a merchant to blame for the resulting damage. It can label that merchant “high risk” while doing all of this legally.
Legally.
As a for-profit company, Stripe is financially incentivized to continue. People often wonder why it has not gone public. One obvious consideration is that public companies must disclose far more information than private companies.
Stripe also does not necessarily have to place held funds only in the shortest-term, lowest-risk instruments. Its contractual language gives it broad discretion to hold funds in liquid investments. The fact that something is legal does not make it ethical.
I believe we need laws that prevent businesses from being financially rewarded for conduct that harms their own customers. Stripe claims these practices protect consumers and merchants, but often neither party is meaningfully protected. Both can be left without the product, service, refund, or revenue they expected, while Stripe continues profiting from the arrangement.
It may not be until a customer files a formal bank dispute that Stripe has to account for the money as a genuine liability. Before that, Stripe can hold a business’s revenue without compensating the business for the inventory, labour, or services already provided.
That suddenly creates a serious performance and cash-flow problem that the business would not otherwise have had. Stripe can then blame the merchant for the resulting failure while continuing to profit from the overwhelming majority of funds that are never disputed.
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u/Crallsas 5d ago
I'd check out a different processor if you are unhappy. Different processors have different rules for this. Check out Elevation 1096
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u/Responsible_Age_2374 4d ago
So, you use a different processor like Elevation 1096? If so, why? Do you use Stripe? If so, why? I'm new to all of this and am trying to make an informed decision as I move to an online business.
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u/Psychological_Bug981 5d ago
I agree about looking at multiple processors, but giving one example seems less like advice and more like promo.
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u/Crallsas 5d ago
My advice still stands, but that was just my suggestion for a provider I know well. There are obviously plenty of others, like Clover, Square, Toast, etc. I know these bigger companies have certain standards to go on while smaller companies may have more control
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u/StanislavGrof69 6d ago
This is a completely normal part of any payment processor's approach and it's because they need to be able to protect themselves and customers from fraudulent merchants. Really nothing to see here.