Reserves - Frequently Asked Questions

What is a reserve?

A reserve is a temporary hold on a portion of a business’s funds for a predetermined period of time. Reserves are intended to cover any anticipated losses that may result from a business’s processing activity. Reserves are a common industry practice used by payment processors such as Stripe, and other financial institutions to ensure that businesses are able to cover disputes and refunds from their customers. Funds held in reserve will be paid out once the reserve term is complete (minus any customer refunds or disputes that may have been covered by the reserve). Reserves do not impact a business’s ability to continue accepting payments with Stripe.

Why are reserves necessary?

As a payment processor, Stripe is responsible for the disputes and refunds that arise when businesses take payments from their customers but are unable to fulfill their orders. When disputes happen, the payment amount, along with any additional dispute fee levied by the card network, is usually deducted from a business’s account balance.

However, it is possible that the funds in the account might not be sufficient to cover any disputed amounts. To avoid such situations, we place reserves to cover any expected future disputes in order to protect both the business and the customer.

How is a reserve amount calculated?

The size of a reserve is determined based on the level of risk associated with any business. Risk in payments often comes down to the potential for incurring losses through disputes that the business may not be able to cover. We continuously monitor the account of each business that works with Stripe, and we assess a range of factors including industry conditions, payment activity, dispute rate, refund rate, and financial stability, amongst others when calculating the level of risk.

These factors may indicate that a business has an elevated risk of customers requesting refunds or disputing payments, or that the business may have operational or financial difficulty in fulfilling customer orders. For example, if a business does not have enough funds in its Stripe account balance, refunds to customers might be delayed. We establish an appropriately sized reserve to help ensure sufficient funds are on hand to cover future refunds or disputes.

Why would a reserve be placed on an account?

A reserve may be placed on an account because we’ve determined that the business presents an increased level of risk. This may be due to a number of reasons, including, but not limited to the following:

You can learn more about what factors or signals indicate high credit risk here.

How to check the status of a reserve

We’ll notify the account by email if and when we need to apply a reserve. The status of a reserve is also viewable on the Balance page of the Stripe Dashboard (see the “Reserve” pane at the bottom of the page). For more detailed instructions on viewing the status of a reserve, see our guide.

When is a reserve removed?

When a reserve is applied to a Stripe account, we’ll send an email with information about the terms of the reserve, including the amount or percentage of funds that will be held, and time period for which the reserve will be applied. A few days before a reserve is set to expire, we conduct another credit review of the account to determine if the reserve should be removed, decreased, or increased. The decision to update the reserve depends on the business’s financial health, the number of refunds and disputes on the account, and several other factors that affect the risk profile. In some rare cases, a reserve may be required indefinitely to support a business on Stripe.

Why might a reserve be extended?

A few days before a reserve is set to expire, we conduct another credit review of the account to determine if the reserve should be removed, decreased, or increased. Unfortunately, if after completing this review, we continue to see an elevated level of risk, we may need to extend the reserve on the account.

The decision to update the reserve depends on the business’s financial health, the number of refunds and disputes on the account, and several other factors that affect the risk profile. To learn more about how you can lower your risk factors, please see the question below.

How to lower the risk presented by your Stripe account

Here are some ways to manage risk, prevent disputes, and generally keep your business in good health:

How to appeal a reserve

It may be possible to appeal a reserve depending on the risk profile of the account. If a reserve can be appealed, the option will appear on the Balances page in the Dashboard. If you do not see this option in your Dashboard and would like to appeal, contact us.

If you are appealing a reserve, please provide as much detail as possible when responding to our questions and include any relevant supporting documentation as this will ensure we have a holistic view of your business and help us make an informed decision faster.

What does Stripe do with reserved funds?

Reserved funds are intended to ensure there are funds available to cover refunds and disputes on an account. If a transaction gets refunded or disputed, its corresponding reserve will be released and used to cover the refund/dispute immediately. Reserve funds will be released in full at the end of the reserve period if they are not needed to cover disputes or refunds.

What are the different types of reserves and how do they work?

Stripe uses two different types of reserves: fixed and rolling. See our step-by-step guide for more information about how a reserve works.