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Traditional payment processors like Stripe have a low risk tolerance, and many merchants struggle with sudden account flags, freezes, and shutdowns as a result. Regardless of the size of your business, a sudden shutdown leaves you scrambling for payment alternatives while your cash flow is stuck in limbo.
What to do if your account is shut down by Stripe lies in understanding why shutdowns occur, acting quickly to protect your funds, and securing a more reliable payment processor that specializes in your industry's unique challenges.
In this guide on protecting your payment processing, we will cover:
- Why Stripe shuts down merchant accounts
- First steps after your account is shut down
- Fund recovery strategies to minimize business disruption
- Long-term strategies to prevent future issues
- Alternative payment solutions for high-risk and growing businesses
Let’s dive into each to get a better understanding of what you should do if your merchant account is shut down by a traditional payment processor.
Why Stripe Shuts Down Merchant Accounts
Volume Spikes
The most common reason an account shutdown by Stripe is sudden increases in transaction volume. Stripe's automated systems flag accounts when transaction volume suddenly increases beyond historical patterns.
So, if your business typically processes $50,000 monthly and suddenly jumps to $200,000 during peak season, Stripe's algorithm may interpret this as suspicious activity rather than legitimate growth. High-volume merchants often end up needing high-risk processors.
Industry Reclassification
Stripe has a prohibited and restricted industry list, and businesses in industries like nutraceuticals, gaming, CBD, crypto, or emerging sectors often face sudden account closures when Stripe decides their industry is "no longer supported." This decision is typically final and non-negotiable, leaving these firms with little in the way of recourse or readily available solutions.
Chargeback Rates
High chargeback rates are another common reason for account closure. The general benchmark for chargeback rates is 1%, and merchants who exceed it often have their accounts closed if they are working with a traditional payment processor. This is because chargebacks increase costs for both the processor and the merchant, and signal that a business may be at higher risk for more chargebacks in the future.
MATCH List Consequences
The Member Alert to Control High-Risk (MATCH) database, controlled by Mastercard, creates some severe consequences. Once listed, you're flagged across all major payment processors for five years, and this label can make it extremely difficult to find a payment processor.
Common reasons for ending up on the MATCH list include:
- Unpaid processing fees
- Chargeback rate exceeding 1%
- Behavior that suggests transaction laundering
- Selling prohibited products
First Steps After Account Shutdown by Stripe
Step 1: Document Everything
You need to ensure that you have all relevant documents and evidence surrounding your account closure. Screenshot your Stripe dashboard, download all transaction records, and save any communication between your company and Stripe.
This documentation is necessary when disputing held funds and can be extremely helpful when applying for new merchant accounts with other payment processors.
Step 2: Contact Stripe Support
In the rare case that it works, formal requests for reinstatement and clarification on fund release timelines can be helpful. Document all responses for future reference with new processors, regardless of whether or not your account is reinstated.
Step 3: Secure Alternative Payment Processing
Most businesses can’t afford to wait for Stripe to restore their account. Merchants need immediate alternatives to maintain cash flow. Look for processors that specialize in your industry and offer:
- Same-day application processing
- Experience with businesses that’ve been rejected by Stripe and other traditional payment processors
- Multiple banking relationships for redundancy
- Dedicated account management
Step 4: Notify Key Stakeholders
Inform your fulfillment team, customer service, and key clients about potential payment disruptions. Prepare alternative payment methods for existing customers.
Fund Recovery Strategies
Reserve Release Timeline
Stripe typically holds funds from closed accounts for 90-180 days after account closure. For accounts with high chargeback rates or MATCH listings, holds can be extended indefinitely pending investigation.
Stripe may request the following documents during the dispute process:
- Proof of product delivery
- Customer service records
- Refund policies and procedures
- Business registration documents
- Bank statements showing legitimate business operations
Make sure you do everything you can to ensure you have this information on hand to improve your chances of recovering held funds.
Long-Term Prevention Strategies
The following long-term prevention strategies can help you avoid getting an account shut down by Stripe, reducing the risk of costly payment processing downtime or held funds:
- Diversify Payment Processors: Never rely on a single payment processor. Successful high-volume merchants maintain relationships with 2-3 processors to ensure business continuity.
- Industry-Specific Processors: Choose processors that understand your industry's unique challenges and advertise support for high-risk industries
- Proactive Communication: Inform your payment processor before major marketing campaigns, product launches, or seasonal spikes to avoid catching your processor off guard with sudden account changes
Overall, the best way to avoid having your account closed is to choose a high-risk specialist processor that supports high-risk and high-volume industries and businesses.
Alternative Payment Solutions for Former Stripe Merchants
Businesses that get accounts closed by traditional processors should seek out more specialized high-risk payment processors to reduce their risk of payment processing issues in the future.
Unlike Stripe's one-size-fits-all approach, these processors provide:
- Personalized underwriting based on your specific business model
- Direct relationships with acquiring banks
- Dedicated support teams familiar with your industry
- Customizable reserve and settlement terms
- Advanced features like chargeback and fraud management to reduce your risk profile
As a result, businesses can operate with more confidence and reduce the costs and other obstacles that come with being a high-risk or high-volume merchant. By combating fraud and chargebacks, businesses can grow more quickly, reduce their payment processing overhead, and increase the stability of their revenue.
Account Shut Down by Stripe? Work With SeamlessChex
It's time to get credit card processing and merchant services from a reliable payment processor that respects the way you do business. Ready to get started? Sign up for your merchant account today or contact a SeamlessChex representative to learn more about our chargeback and fraud management solutions and how we can help your business scale smoothly after an account shutdown by Stripe.
