AI Overview
Summary
Many merchants, especially startups, use Stripe because of its convenience, but fail to read the company’s stringent Terms of Service (TOS) and Prohibited & Restricted Business list, leading to severe financial risk. Stripe’s automated systems often flag businesses in “gray areas” like CBD, supplements, financial services, or adult content as high-risk, resulting in frozen payouts (sometimes for 90+ days), account closures without notice, and potential placement on the MATCH LIST. The core problem is that Stripe is a payment aggregator that underwrites after the fact, creating instability. Nationwide Payment Systems (NPS) offers a relationship-based, transparent alternative, guaranteeing upfront review, a dedicated relationship manager, 24/7 live support, and flexible pricing, ensuring merchants have the clarity and stability their growing businesses require.
Stripe’s Terms of Service: What Merchants Don’t Realize Until It’s Too Late
The Problem: “I Thought Stripe Worked for Everyone”
Stripe has undeniably become the go-to payment processor for developers and startups because it offers speed, ease of use, and a platform built for online payments. Consequently, you can sign up in minutes, paste some code into your website, and immediately start taking credit cards.
However, that convenience hides a serious risk: Stripe’s Terms of Service (TOS) and Prohibited & Restricted Business list are notoriously strict—and constantly changing.
Unfortunately, most business owners never read them. They simply assume that because Stripe approved their account, they’re safe. Then, one day, a payout doesn’t arrive, or their account is suddenly frozen with thousands of dollars held in limbo. When you finally talk to support (if you can reach them), you often find out your business type is “restricted.”
sponsored by
Stripe’s Prohibited and Restricted Businesses
Let’s begin with the facts. Stripe’s full list of banned and limited business types is publicly available on their website. Stripe separates businesses into two risk categories: Prohibited (cannot use the service, period) and Restricted (can process only after extra review or under strict conditions).
Here is a snapshot of industries that get flagged most often:
| Category | Status | Examples |
| Adult content or services | ❌ Prohibited | Explicit media, escort services, cam sites |
| Cannabis, CBD, or hemp products | ⚠️ Restricted | CBD oils, vapes, or THC-derived items |
| Financial services or lending | ⚠️ Restricted | Credit repair, payday loans, investment schemes |
| Gambling or betting | ❌ Prohibited | Online casinos, fantasy sports, sweepstakes |
| Supplements and nutraceuticals | ⚠️ Restricted | Weight loss, energy pills, male enhancement |
| Tobacco and vaping products | ⚠️ Restricted / Prohibited | Cigarettes, e-cigs, vape juice |
| High-ticket consulting / coaching | ⚠️ Restricted | “Make money online” programs, business coaching |
| Ticketing, crypto, collectibles | ⚠️ Restricted | NFTs, secondary ticket resales |
Stripe’s reasoning usually revolves around “high-risk transactions”—chargebacks, compliance exposure, or regulatory gray areas. Crucially, their algorithms can be blunt instruments. You might think you’re selling a legal, legitimate product, yet Stripe’s automated systems can flag you for review just because your category looks risky.
Therefore, just because you were initially approved does not guarantee your business will keep its merchant account open. Stripe and similar companies typically do not fully underwrite your business until you start processing transactions; consequently, this can cause funds to be held and accounts to be shut down, creating serious issues for your business.
Why This Matters
If you process payments through Stripe and fall into a gray area, you are taking a major financial risk. The consequences can include:
-
Freezing your payouts for up to 90 days (or longer).
-
Closing your account without notice.
-
Flagging your EIN or domain as “high-risk,” which affects future applications.
-
Putting your business on the MATCH LIST, which can prevent you from obtaining processing services for up to five years.
Furthermore, because Stripe is a third-party payment aggregator, you don’t have a true merchant account. You are sharing risk with thousands of other businesses. As a result, if someone else on the platform commits fraud or triggers a regulatory alert, entire business segments can be restricted.
There’s a Better Way: Transparency + Relationship-Based Payments
At Nationwide Payment Systems, we’ve seen this happen countless times: a merchant gets burned by Stripe or PayPal, loses access to their funds, and comes to us for help.
Here’s how we’re different:
-
Upfront Honesty: We tell you upfront if your business is considered high-risk—and we’ll find a processor that genuinely supports it.
-
Dedicated Relationship: You get a dedicated relationship manager—not a chatbot or automated email.
-
Live Support: We offer 24/7 live support because no one should lose sleep over a frozen payout.
-
Flexible Pricing: We offer cost-plus, dual pricing, or 0% processing options.
-
Integrated Tools: Our NPSONE Gateway + ClickBillR Smart Invoicing let you accept credit cards, ACH, and recurring payments—all in one secure platform.
We have an API similar to Stripe and can set you up with a sandbox testing environment. Ultimately, whether you’re selling online, in person, or through invoicing—you deserve clarity, compliance, and real customer service.
How to Protect Your Business
If you’re using Stripe today (or any aggregator), you should take these steps now:
-
Read the List: Review the Stripe Prohibited and Restricted Businesses list carefully.
-
Check Your NAICS Code: Ensure your business activity doesn’t fall under financial services, CBD, supplements, or adult categories.
-
Download Reports: Always keep backups of your transaction history and payout reports.
-
Explore Alternatives: Ask about ACH and alternative pricing models, as credit cards aren’t your only option, and ACH can often lower costs and risk.
-
Find a Partner: Work with a processor that truly gives you options and wants your specific business.
Final Thoughts
The viral Reddit discussion proved one thing: Most business owners never read the fine print until it’s too late. Stripe is an incredible tool for developers and tech startups, but for established merchants, it’s not always the right fit. If your business is growing, regulated, or even slightly “outside the box,” you need a partner who understands your industry, compliance requirements, and risk profile. That’s where we come in.
👉 Book a Free Consultation with Allen Kopelman — CEO of Nationwide Payment Systems:
📅 https://calendly.com/allen-nps
🎙️ Listen: B2B Vault Podcast
CLICK HERE TO FIND MORE ABOUT OUR PROGRAMS
FAQ: Frequently Asked Questions
What is the fundamental risk of using Stripe for a growing business, despite its convenience?
The fundamental risk is that Stripe is a payment aggregator that performs underwriting after you start processing payments. This means initial approval is temporary, and if their automated systems later flag your business as “restricted” or “high-risk” (even if approved before), they can freeze your payouts and close your account without warning, leaving your business funds in limbo.
What are the two main categories of businesses that Stripe restricts or prohibits?
Stripe separates businesses into Prohibited (cannot use the service at all, e.g., online gambling, adult services) and Restricted (may be able to process after extra review and under strict conditions, e.g., CBD, nutraceuticals, high-ticket consulting, financial services).
What are three common "gray area" industries that often get flagged as Restricted by Stripe?
Three common “gray area” industries that often get flagged are CBD/hemp products, supplements/nutraceuticals (like weight loss or energy pills), and certain financial services (like credit repair or lending). Even if the product is legal, Stripe’s risk exposure requirements often categorize them as high-risk.
What is the single most severe penalty Stripe can impose on a merchant who violates the TOS?
The most severe penalty is putting the business on the MATCH LIST (a terminated merchant file). Once listed, the business can be barred from obtaining any new payment processing services from virtually any provider for up to five years.
Why is a lack of transparency and support a major threat when an account is frozen?
When Stripe freezes an account, merchants report receiving no clear warning or explanation, with payouts frozen for 90 days or longer. Because Stripe relies heavily on automated systems, merchants struggle to reach a human support agent or a dedicated representative to resolve the compliance issue, crippling their cash flow.
What crucial step does Nationwide Payment Systems (NPS) take before a merchant starts processing to prevent account freezing?
NPS provides an upfront, transparent review and tells the merchant immediately if their business is considered high-risk. NPS will then work to find a guaranteed processor that supports that specific business model, unlike Stripe, which underwrites after the fact.
Besides credit card processing, what alternative payment method does NPS recommend to lower risk and costs?
NPS strongly recommends utilizing ACH (Automated Clearing House) payments. ACH can significantly lower processing costs and reduce the risk of chargebacks compared to credit card transactions, which is vital for service-based and B2B companies.
Why is sharing a "third-party payment aggregator" platform like Stripe inherently risky?
When using an aggregator, your business shares risk with thousands of other businesses. If another business on the platform commits a major fraud or triggers a regulatory alert, entire categories of merchants can be restricted or terminated, even if your business was fully compliant.
What integrated NPS tool is designed to manage B2B and invoicing risk while streamlining the back-office?
The ClickBillR Smart Invoicing platform, integrated with the NPSONE Gateway, is designed for this. It handles credit cards and ACH, supports dual pricing, and automatically syncs data with QuickBooks Online, ensuring accurate reporting and lower-risk payment methods for professional services.
