Stripe High-Risk Business: What it Means & How to Avoid Bans

As someone operating in what Stripe may view as a high-risk industry, I wanted to know what I was getting into.

I spent hours reviewing documentation, and here, I’ll share what Stripe defines as “high-risk,” what it entails, and what can lead to bans.

Let’s start by defining “high-risk.”

Key Takeaways

• High-risk businesses often operate in specific industries or have poor reputations.
• Penalties can include reserves, limitations, or bans.
• 90% of e-commerce businesses are considered “high-risk.”
• Keeping chargeback rates low and staying transparent can help avoid bans.
• Reducing fraud also helps; Stripe Radar can cut fraud by up to 25%.
• Aim to keep your chargeback rate under 0.65% to avoid high-risk status.

One way Stripe labels a business as high-risk is through its chargeback rate. You can keep your rate within an acceptable range by using chargeback alerts that integrate with Stripe.

We offer such alerts. Learn more now.

What Is a Stripe High-Risk Business?

A Stripe high-risk business is one Stripe deems risky due to factors like industry, geographical region, and finances. These can lead to account limitations. Stripe checks many elements to identify high-risk businesses. Including potential for fraud, chargebacks, and other payment issues.

If Stripe labels your account as “high-risk,” several things may happen:

• Setting a reserve: They may hold a portion of your funds.
• Account closure: Stripe may close your account, halting payments and access to funds.
• Ban: You may face a ban.

I’ll cover account bans in detail later.

The second point is straightforward. If your account is closed, you can’t use Stripe.

And what’s a reserve?

A Stripe reserve is a portion of funds held from high-risk businesses to cover potential chargebacks. These reserves often range from 5 – 10% of transaction volume. Stripe will hold these for 30 – 180 days.

The percentages held and days held depend on factors like risk profile, chargeback history, and industry.

We have a guide on reserves in general. Though, it doesn’t strictly cover Stripe. It’s good to know about, though.

How do you know if you’re a high-risk business?

Summary: High-risk businesses meet criteria and may have limitations or reserves placed on their account.

What Does Stripe Consider a High-Risk Business?

Stripe considers businesses high-risk based on industry type and business model. High-risk industries include gambling, adult entertainment, and pharmaceuticals. Or businesses with subscription models, frequent chargebacks, or high transaction volumes.

Before you start accepting payments, Stripe evaluates several factors to assess risk, including:

By “business location,” I mean where your business is registered. For example, businesses registered in Mexico may face higher risk classification. This comes from the country's high chargeback rates.

After you start accepting payments, Stripe assesses more indicators, including:

• Frequent chargebacks, refunds, or fraud
• High chargeback rates
• Large volumes of international transactions, especially from high-fraud regions
• High-value transactions (over $100), which increase chargeback risk
• Subscription-based services
• Heavily regulated industries with compliance risks
• New or unestablished businesses

While Stripe doesn’t specify a chargeback rate threshold, they recommend keeping it under 0.75%.

I’ll discuss this further soon.

Stripe doesn’t clearly define “High fraud regions.” But high credit card fraud in countries is often a risk factor.

I couldn’t find any concrete evidence on the countries with the most credit card fraud, but I found that Mexico had the most credit card fraud [1]. Followed by the US, according to this source.

Though, I doubt they’ll flag you if you’re from the States.

Subscription services can lead to higher risk, especially because people may test credit cards. This practice has led to some accounts getting shut down [2]. Stripe has a great guide on tacking card testing.

Otherwise, if you’re not a proven business, Stripe will have a difficult time trusting you.

Summary: Your business operates in certain industries or has a bad reputation.

Industries Considered High-Risk by Stripe

Many industries fall under Stripe's high-risk category, including:

• Pharmaceuticals and nutraceuticals: Regulatory scrutiny and safety risks.
• Gambling and casinos: Fraud potential and high chargeback rates.
• Financial services: Regulatory and financial stability risks.
• Cryptocurrency: Market volatility and regulatory uncertainty.
• Legal services: Potential for disputes.
• Tobacco and vaping: Regulatory issues and health concerns.
• E-commerce: Fraud and chargeback risks, especially for electronics and jewelry.
• Travel and tourism: High chargebacks, financial instability, and external factors.
• Adult entertainment: Chargebacks, age restrictions, and legal concerns.

Fun fact. 90% of e-commerce businesses are considered “high-risk [3].” If you’re selling online, you’re almost guaranteed to take part in e-commerce.

Most of these industries come with more volatility in different areas. For instance, many consumer electronics break easily. Thus, it’s harder for businesses to win chargebacks that involve them.

That’s why their chargeback win rate is only around 16.59%.

More than 28 countries ban gambling [4]. Many others heavily regulate it. These contribute to its volatility.

I mentioned there’s a potential to get banned from being a risky business.

Next, let’s explore why Stripe may ban an account.

Top Reasons for Stripe Account Bans

Stripe often bans accounts for these reasons:

1. High chargeback rates: Chargebacks above industry standards.
2. Violating Stripe’s terms of service.
3. Operating prohibited businesses (e.g., adult, gambling, cannabis).
4. Non-compliance with financial regulations.
5. Processing illegal transactions.
6. Extended account inactivity (90+ days).
7. Poor reputation with financial partners.
8. Selling restricted products.
9. Operating in a high-risk jurisdiction.

I’ll provide more context on some of these points. The rest are self-explanatory.

1. High Chargeback Rates

Stripe does not have a specific chargeback rate threshold. But they recommend keeping rates below 0.75%. Card networks like Visa and Mastercard have their own monitoring programs with higher thresholds. Typically around 0.90% to 1.50%.

I recommend keeping rates below 0.65% to prevent any risks associated with chargebacks.

Unlike most payment processors, Stripe has 2 ways to measure chargebacks; dispute rate and dispute activity. The former measures disputes based on charge dates. And the latter based on dispute dates.

I provide more context in a separate guide.

I’ll provide solutions to keep these rates low in a bit.

We need to keep the momentum going.

2. Non-Compliance with Financial Regulations

Financial regulations involve anti-money laundering, sanctions screening, and reporting.

Violating these can prompt action from Stripe. As they aim to avoid legal and reputational risks.

Always follow the laws in your target markets.

This next point also has to deal with negative interactions with financial institutions.

3. Poor Reputation With Financial Partners

“Poor reputation with financial partners” means the account holder has a history of engaging in activities that financial institutions view negatively. This could include instances of fraudulent transactions.

This next section is also, surprisingly, a common reason for bans.

4. Selling Restricted Products

Some restricted products include:

• Illegal drugs, drug paraphernalia, and products mimicking illegal drugs
• Adult content and services
• Gambling and sports betting with monetary prizes
• Counterfeit goods and pirated content
• Marijuana and cannabis-related products, including high-THC CBD
• Nutraceuticals with unverified health claims
• Weapons, explosives, and hazardous materials

Stripe has a more thorough list of what’s not allowed here. Check it out.

Stripe takes a firm stance against these types of products and services. As they can lead to legal issues, consumer harm, and reputational damage for the processor.

Certain restrictions also apply, like prohibitions on exporting luxury goods to Russia.

Speaking of controversial areas.

5. High-Risk Jurisdictions

Stripe bans transactions from citizens in certain regions, including:

• North Korea
• Cuba
• Iran
• Syria
• Disputed Ukrainian regions (Luhansk, Donetsk, Crimea)

What does “getting banned” even mean?

What Happens if You’re Banned from Stripe?

If Stripe bans or closes your account, it affects your business in several ways:

• Inability to process transactions: You can’t accept payments.
• Inaccessible funds: They may hold onto your funds for up to 90 days to ensure there’s no risk of fraud.
• Reporting to high-risk databases: Stripe will likely report your account to high-risk merchant databases, such as the MATCH list.
• Potential fees and penalties: Additional charges may be assessed as part of the account closure process, depending on your contract terms.

If you think your account was wrongly closed, reach out to Stripe support to appeal the decision. Should you regain access, you’ll need to submit an appeal via Stripe’s account recovery form.

However:

If the appeal doesn’t succeed, consider having a backup payment processor ready. That way, your business can continue operating.

What’s a MATCH list?

The MATCH (Member Alert to Control High-Risk) list is a database managed by payment processors. It flags businesses previously terminated from credit card processing.

Listing on MATCH acts as a warning for other processors who may consider it too risky to onboard such sellers.

If you’re placed on this list, it can make it challenging to secure new accounts with other processors for a period of 5 years. After which, the listing typically expires.

That sucks. How do you prevent getting banned?

How Do You Avoid Getting Banned on Stripe?

To protect your Stripe account, follow these best practices:

• Write detailed product descriptions and clear terms of service on your website.
• Keep business and banking information current and accessible.
• Use fraud detection tools and transaction verification tools.
• Respond quickly to all chargeback disputes with accurate documentation.
• Monitor transactions and maintain financial records.
• Follow data protection laws relevant to your operating regions.
• Update Stripe about any changes to your business model or expansion plans.

To avoid a ban, focus on preventing the actions that can lead to one. For example, don’t sell restricted products. Easy enough, right?

Otherwise, follow these tips:

Ensure your website has detailed product pages describing what you’re selling. Include features, pricing, limitations, and care instructions. This level of detail prevents misunderstandings that lead to chargebacks.

Craft a clear, concise terms of service page with your return policy and other key details. Use a checkbox to require customers to agree to these terms before completing a purchase. This creates an “agreement” between you and the shopper.

Some businesses use a no-chargeback clause, but it rarely helps with disputes.

Keep essential documents — like tax IDs, bank details, and other business records — readily available. This way, if Stripe requests proof of your business’s legitimacy, you’re prepared.

Use CVV checks, machine learning, and tools like Stripe Radar to identify and prevent fraud.

Radar flags issues such as mismatched payment information, sudden volume spikes, and high-risk transactions.

These tools protect customers and maintain a positive reputation with Stripe.

The less fraud, the better.

The same goes for chargebacks. When a chargeback occurs, gather proof to support your case. The specific evidence needed depends on the reason code. We offer a list of these codes in another guide.

Another way to reduce chargebacks is to use chargeback alerts. These alerts let you resolve issues before they escalate. In many cases, individual alert providers can prevent up to 40% of chargebacks. Combining all 3 (CDRN, RDR, and Ethoca) could prevent up to 91%.

Preventing these disputes keeps your chargeback rate low.

We offer these alerts. Learn how they work and try them out.

If you’re expanding into new markets or changing product offerings, let Stripe know. Updating them allows Stripe to support your growth. Rather than flagging changes as high-risk.

Lastly, align your website with card network standards. Stripe has a pretty thorough checklist that’ll guide you on the right path.

Congrats. You’ve potentially prevented a ban. Keep these best practices in mind to keep Stripe happy.

Best Practices for High-Risk Stripe Merchants

To safeguard your account, especially in a high-risk industry, follow these practices:

• Verify merchant accounts before granting platform access.
• Use Stripe Radar and fraud prevention tools.
• Respond to chargebacks within 24 hours.
• Monitor transactions for unusual patterns.
• Maintain clear billing descriptors.
• Keep detailed transaction records.
• Display transparent refund policies.

Most of these tips also help prevent account bans.

It’s also a good idea to familiarize yourself with Stripe’s chargeback process, including:

• Chargeback types: Knowing which ones to contest.
• Time limits: Late responses lead to automatic chargeback losses.
• Evidence: You’ll need proof to validate transactions.

The exact process varies across card networks, but our Stripe chargeback guide covers the basics. Other resources in our blog provide chargeback management strategies at every level.

I mentioned Stripe Radar a few times. It allows you to gauge the risk of a transaction and determine whether to proceed with it based on transaction data and buyer patterns. For instance, it’ll check whether your buyer’s shipping and billing addresses match.

If not, it’ll give you a chance to verify the buyer’s identity. To ensure it’s them making the purchase.

In 2018, Radar has helped many businesses reduce fraud by up to 25%.

And for the most part, it’s accurate. As it has blocked only 0.1% of legitimate payments.

I also recommend looking into other Stripe apps that could help with chargeback management. We compare a couple in a separate guide.

Having a clear billing descriptor is essential for avoiding customer confusion, which often leads to chargebacks

Consider these tips when crafting one:

• Keep it concise: State the purpose of the charge in under 20 characters. Avoid marketing terms.
• Use dynamic elements: Include details like company or product names.
• Prioritize clarity: The goal is customer recognition.
• Follow card network rules: Ensure your descriptors align with their card brand requirements.
• Test and refine: Review customer feedback on billing issues, and adjust if needed.

For example, a billing descriptor like “Theo’s Bakery - Cake” is concise.

This isn’t as descriptive as I want. But I expand on these points and how to create the “best” descriptor in a separate piece.

Additionally:

Outline your refund policy clearly. This policy should cover the timeframe for requesting refunds, the steps required, any exclusions, and refund methods. Make this policy easily accessible on your website and checkout page.

Use simple language, avoid legal jargon, and highlight key points like return windows and conditions.

Zappos, a shoe store, has an excellent return policy that follows most of the above principles.

If a customer files a chargeback despite your policy, take a screenshot of the relevant policy section. Include it in your representment package to increase the chance of a successful dispute resolution.

This will help increase your odds of winning a chargeback.

Is Stripe Safe for High-Risk Businesses?

Stripe is a safe, reliable choice for high-risk businesses. But it’s wise to have a secondary payment processor ready.

Diversifying payment options can shield your business from disruptions. It also allows you to continue accepting payments if your primary Stripe account faces a ban.

FAQs

How Do You Know If You're a High-Risk Business?

Stripe will usually let merchants know if they believe their risk is high.

Conclusion

Having a business that Stripe deems as high-risk could lead you down a dark path. For instance, you could face penalties, reserves, or bans. But there’s hope. You can prevent yourself from facing penalties by lowering your chargeback rates.

One of the best ways to do this is with chargeback alerts. We offer every chargeback alert and make it simple to integrate with Stripe.

Try them out.

Sources

• [1] Understanding Credit Card Fraud. TaTa Consultancy Services. 2002. PDF.
• [2] Stripe shut down our account. Reddit. 2024.
• [3] 90% of Online Merchants Are High-Risk. DirectPayNet. 5/4/2022.
• [4] Where is online gambling legal? Corefy. 2/19/2024.