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Your title is a little misleading IMO. They are not holding your money indefinitely they have added a rolling reserve which means yes you have to wait 28 days

Your title is a little misleading IMO. They are not holding your money indefinitely they have added a rolling reserve which means yes you have to wait 28 days for the remaining 25% to get paid from each transaction. While I agree they need to protect themselves in reality 25% can amount to more then the margin on many products and so can put a company out of business if the company is struggling already. That said, this is a normal practice in the financial services industry regardless of provider. I have worked with 100's of ecommerce clients over the years and whenever their chargebacks/refunds started going up (for any reason), their credit card processors would always place a reserve on the transactions. It usually ranged from 10%-50%. Many times they could get it removed over time once their chargebacks/refunds dropped again, but you have to fight to do that every month. What you are not explaining is why your chargebacks and refunds are up, Stripe's letter to you specifically mentions this, so they are trying to protect themselves. They also will have contractual obligations with card issuers/gateways etc that require them to do this if your chargeback rate exceeds some value. This isn't just you, this will happen to anyone. Related by slightly different: I worked with a client who started getting dropped every 8 months or so from different major credit card processors. Their had a product & on-going service for senior citizens and their clients would forget they purchased the service (or their kids/grandkids would find it on a statement and get upset) and so then it would be reported as fraud or processed as a chargeback etc. Even though the company had voice recordings and proof the client themselves initiated the transactions the processors would drop them over time because their refund/chargeback rate would exceed 30% over time. This company is well known, not a scam and does a few million dollars every quarter in sales. So the way we helped solve it for them was to break their transactions across many providers and also move them into doing more ACH/bank transfers instead of credit cards. This is a common method to solve these issues.

graeme 6y ago
Indeed, Stripe’s rep just commented as follows: > “Edwin from Stripe here. Holding funds is like a buffer for your balance—it makes sure there's enough money to cover any increase in refunds or disputes from customers. If there wasn't, customers may not get their money—and we only hold funds after we review a business and realize that it's at risk of this (like if disputes are growing). Stripe doesn't gain anything or do anything with this buffer. We don't earn interest. It's reserved just for your customers. We regularly re-review the need for the reserve, then remove it at the earliest opportunity. (It's in our interest to! We hate refunds and disputes, which are expensive for us, and would rather see your cashflow to your business grow.)” As for chargebacks, customers really win even if there are voice recordings etc? Or is it just too much hassle to go through the proof process for smaller transactions?
- WrtCdEvrydy 6y ago
  Right, but nothing in this post indicates they experienced a high chargeback or refund volume, just a sales decrease. I wonder if they had to refund a lot of travel that wouldn't happen in 2020... and that's what triggered it. If I had a partner pull a rug out from under me, I'd focus on replacing them, especially if their reasoning is bullshit.
  - shash7 6y ago
    Also, note the lack of empathy. A good rep with social skills can turn a bad conversation into a good one. Seems like Stripe isn't investing in customer support, just aggressive expansion.
  - graeme 6y ago
    The letter from stripe said there was an increase in chargebacks and refunds on the account. And if sales decline, that means refunds and chargebacks are an even higher proportion of total money in the account.
  - stu2b50 6y ago
    To be fair, I'm pretty sure the author has a vested interest in not mentioning if they have increased chargeback or refund volume. It's not exactly an unbiased source.
    - WrtCdEvrydy 6y ago
      I mean, to be honest, if your sales decrease 87% and you have to refund a full year's worth of travel, I'd expect Stripe to say something. Seems like either they're burying the lede or Stripe is being a bag of a dicks.
- 8organicbits 6y ago
  > We don't earn interest. I think it should be the other way, those funds should earn interest, but that interest should go to the business after the waiting period.
mlthoughts2018 6y ago
I think your response is very disingenuous in the sense that nobody owes Stripe any protection for this. Their job is to mediate the risk as a payment platform, that’s why you are outsourcing payments to them in the first place. They also market themselves as having advanced fraud detection capabilities and smart dunning capabilities totally meant to encourage customers to rely on and plan around those features. If Stripe needs a buffer to handle increased chargebacks, that needs to come from Stripe’s own revenue, not customers. Imagine if an insurance company suddenly started retaining 25% of benefits owed because there was some event in the world (natural disaster, pandemic) leading to a much higher rate of claims. It’s totally bogus for anyone to say that’s fair just because reality dealt a tough hand to that insurance company. It’s fundamentally their responsibility to remain solvent and fulfill benefits without externalizing higher premiums or holds or anything onto customers.
- notahacker 6y ago
  Their job is to collect payments, not to insure their clients against chargebacks. A chargeback is, after all, someone - rightly or wrongly - accusing their client of taking a payment illegitimately. And actual insurance companies certainly don't expedite immediate payments when fraud alerts are set off.
  - mlthoughts2018 6y ago
    No, their job is to collect payments as well as detect and prevent fraud and expedite chargebacks and refunds. https://stripe.com/radar https://stripe.com/radar If I’m paying Stripe for Radar, and there are needed chargebacks, it’s Stripe’s issue, not mine.
    - SirensOfTitan 6y ago
      Is there any indication that the poster is paying for Radar? It doesn't seem like it.
supernova87a 6y ago
> senior citizens and their clients would forget they purchased the service (or their kids/grandkids would find it on a statement and get upset) You know, I find that many businesses don't do one of the most simple things -- they fail to pay attention to how their transactions appear on the credit card statement line. A simple name and intuitive string + phone number instead of some unfamiliar company name "dba" can reduce the confusion by a lot.

graeme 6y ago

Indeed, Stripe’s rep just commented as follows: > “Edwin from Stripe here. Holding funds is like a buffer for your balance—it makes sure there's enough money to cover any increase in refunds or disputes from customers. If there wasn't, customers may not get their money—and we only hold funds after we review a business and realize that it's at risk of this (like if disputes are growing). Stripe doesn't gain anything or do anything with this buffer. We don't earn interest. It's reserved just for your customers. We regularly re-review the need for the reserve, then remove it at the earliest opportunity. (It's in our interest to! We hate refunds and disputes, which are expensive for us, and would rather see your cashflow to your business grow.)” As for chargebacks, customers really win even if there are voice recordings etc? Or is it just too much hassle to go through the proof process for smaller transactions?

WrtCdEvrydy 6y ago
Right, but nothing in this post indicates they experienced a high chargeback or refund volume, just a sales decrease. I wonder if they had to refund a lot of travel that wouldn't happen in 2020... and that's what triggered it. If I had a partner pull a rug out from under me, I'd focus on replacing them, especially if their reasoning is bullshit.
- shash7 6y ago
  Also, note the lack of empathy. A good rep with social skills can turn a bad conversation into a good one. Seems like Stripe isn't investing in customer support, just aggressive expansion.
- graeme 6y ago
  The letter from stripe said there was an increase in chargebacks and refunds on the account. And if sales decline, that means refunds and chargebacks are an even higher proportion of total money in the account.
- stu2b50 6y ago
  To be fair, I'm pretty sure the author has a vested interest in not mentioning if they have increased chargeback or refund volume. It's not exactly an unbiased source.
  - WrtCdEvrydy 6y ago
    I mean, to be honest, if your sales decrease 87% and you have to refund a full year's worth of travel, I'd expect Stripe to say something. Seems like either they're burying the lede or Stripe is being a bag of a dicks.
8organicbits 6y ago
> We don't earn interest. I think it should be the other way, those funds should earn interest, but that interest should go to the business after the waiting period.

mlthoughts2018 6y ago

I think your response is very disingenuous in the sense that nobody owes Stripe any protection for this. Their job is to mediate the risk as a payment platform, that’s why you are outsourcing payments to them in the first place. They also market themselves as having advanced fraud detection capabilities and smart dunning capabilities totally meant to encourage customers to rely on and plan around those features. If Stripe needs a buffer to handle increased chargebacks, that needs to come from Stripe’s own revenue, not customers. Imagine if an insurance company suddenly started retaining 25% of benefits owed because there was some event in the world (natural disaster, pandemic) leading to a much higher rate of claims. It’s totally bogus for anyone to say that’s fair just because reality dealt a tough hand to that insurance company. It’s fundamentally their responsibility to remain solvent and fulfill benefits without externalizing higher premiums or holds or anything onto customers.

notahacker 6y ago
Their job is to collect payments, not to insure their clients against chargebacks. A chargeback is, after all, someone - rightly or wrongly - accusing their client of taking a payment illegitimately. And actual insurance companies certainly don't expedite immediate payments when fraud alerts are set off.
- mlthoughts2018 6y ago
  No, their job is to collect payments as well as detect and prevent fraud and expedite chargebacks and refunds. https://stripe.com/radar https://stripe.com/radar If I’m paying Stripe for Radar, and there are needed chargebacks, it’s Stripe’s issue, not mine.
  - SirensOfTitan 6y ago
    Is there any indication that the poster is paying for Radar? It doesn't seem like it.

supernova87a 6y ago

> senior citizens and their clients would forget they purchased the service (or their kids/grandkids would find it on a statement and get upset) You know, I find that many businesses don't do one of the most simple things -- they fail to pay attention to how their transactions appear on the credit card statement line. A simple name and intuitive string + phone number instead of some unfamiliar company name "dba" can reduce the confusion by a lot.