Understand how charges work in a Connect integration

In a Connect integration, for your platform or a connected account to accept a payment from a customer, you must first create a charge. The type of charge you create determines how the funds are distributed between your platform, the connected account, and Stripe. It also determines whether your platforms or the connected accounts information appears on the customers bank or billing statement and which account Stripe debits for refunds and chargebacks.

Charge types

Connect uses three types of charges in two general categories:

• Direct charges: payments made directly to a connected account. Funds then transfer from the connected account to Stripe or the platform account as fees.
• Indirect charges: Payments made to your platform. Funds then transfer from your platform to Stripe as fees and to the connected account as its portion of the payment. Indirect charges include destination charges and separate charges and transfers, which differ in the way they transfer funds from your platform to connected accounts.

The following table describes many factors to consider when choosing which charge type to use. Your platforms business model is particularly important because it can affect how funds flow through Stripe. To review Stripes recommendations for your business, refer to your platform profile.

You can use multiple charge types, if thats appropriate for your business.

Direct charges

Create a charge directly on a connected account. The accounts customers are often unaware of your platforms existence. You can specify an application fee, which transfers to your platforms account balance when the connected account collects the payment.

This charge type is best suited for platforms providing Software as a Service (SaaS). For example, Shopify provides tools for building online storefronts, and Thinkific enables educators to sell online courses.

With this charge type:

• You create a charge on your connected account, so the payment appears in the connected accounts balance, not in your platforms balance.
• The connected accounts balance increases with every charge.
• Funds always settle in the country of the connected account.
• Your platforms balance increases with any application fees you collect for a charge.
• Refunds and chargebacks reduce the connected accounts balance.
• You can choose whether to have Stripe debit fees directly from connected accounts or from your platform account.
• You can use Managed Risk if you meet the availability requirements.
• You create parent payment method configurations for your connected accounts, who can customize their own child configurations.

[Direct charges funds flow diagram]

Funds flow for direct charges

For more information about direct charges, see Direct charges.

Destination charges

Create a charge on the platform and immediately transfer funds to the connected account. You decide whether some or all of those funds are transferred, and whether to deduct an application fee.

This charge type is best suited for marketplaces, such as a home rental marketplace or a ridesharing app.

With this charge type:

• You create a charge on your platform, so the payment appears in your platforms balance. A portion of the funds immediately transfers to the connected accounts balance (see the funds flow diagrams below).
• The portion of the funds that remains in your platform balance represents the fee you charge your connected account.
• Refunds and chargebacks reduce your platforms balance.
• Stripe debits fees from your platforms balance.
• Charges use your platforms payment method configurations, unless they use on_behalf_of.

[Destination charges with fee deducted funds flow diagram]

Funds flow for destination charges with the platform fee deducted from the transferred amount

[Destination charges with post-paid fee funds flow diagram]

Funds flow for destination charges with the platform fee paid after transferring the full amount

For more information about destination charges, see Destination charges.

Separate charges and transfers

Create charges on your platform and split funds between multiple connected accounts, or hold them when you dont know the specific user at the time of the charge. The charge on your platform account is decoupled from the transfers to your connected accounts.

This charge type is best suited for marketplaces that need to split payments between multiple parties, such as DoorDash, a restaurant delivery platform.

With this charge type:

• You create a charge on your platforms account first. Create a separate transfer to move funds to your connected account. The payment appears as a charge on your account and theres also a transfer to a connected account (amount determined by you), which is withdrawn from your account balance.
• You can transfer funds to multiple connected accounts.
• Your account balance is debited for the cost of the Stripe fees, refunds, and chargebacks.
• Charges use your platforms payment method configurations, unless they use on_behalf_of.

Separate charges and transfers require a more complex Connect integration. Use them only if your business use case requires them:

• A one-to-many relationship. For example, a payment made to a delivery service needs to be split between the store (the source of the items being delivered) and the delivery person.
• A many-to-one relationship. For example, a carpool trip with a ride-hailing service.
• Charges created before the destination account is known. For example, a janitorial service could process a payment before deciding which janitor to assign to the job.
• Need to transfer funds before receiving a payment, or while the charge is pending. For example, an ad network needs to purchase ad space before they can sell ad time or before receiving any payment from customers.
• Transfer amounts greater than the associated payments. For example, a platform provides a discount to its customer but pays its user the full amount.

In some cases, the transfer amount can be greater than the charge amount, or the transfer is made before the payment is processed. You must monitor your account balance carefully to make sure it has enough available funds to cover the transfer amount. You can also associate a transfer with a charge so the transfer doesnt occur until the funds from that charge are available.

[Separate charges and transfers with multiple connected accounts funds flow diagram]

Funds flow for separate charges and transfers with multiple connected accounts

For more information about separate charges and transfers, see Separate charges and transfers.

Indirect charges using the on_behalf_of parameter

To make the connected account the business of record for the payment, use the on_behalf_of parameter. When on_behalf_of is set to the ID of the connected account, Stripe automatically:

• Settles charges in the country of the specified account to minimize declines and avoid currency conversions.
• Uses the fee structure for the connected accounts country.
• Uses the connected accounts statement descriptor.
• Uses the connected accounts address and phone number (rather than the platforms) on the customers statement if the connected account is in a different country than the platform.
• Pays out a connected account, depending on the days specified in its delays_days setting.

Stripe fees

There are two components to Stripe fees with Connect: which pricing plan applies to the payment and which account pays Stripe fees.

When using Direct charges, you can choose how Stripe fees are billed to your connected accounts.

Read more about fee billing behaviors with Direct charges.

Destination charges and separate charges and transfers typically use the platforms pricing plan and are assessed on the platform. When the on_behalf_of field is set, the country of the connected account is used to determine the country specific fees charged to your platform account.

For more information on Connect fees and how to request custom pricing, see the Connect pricing page.

Refunds

You can issue a refund to pay a customer back for money spent on a returned good or to compensate for unsatisfactory service. Stripe handles refunds differently for each of the charge types:

Disputes and chargebacks

For disputes on payments created using direct charges, Stripe debits the disputed amount from the connected accounts balance, not your platforms balance. Stripe can bill the dispute fee to either the platform or the connected account, depending on the connected accounts configuration. For more detail about how we bill fees for disputes on direct charges, see Fee behavior on connected accounts.

For disputes where payments were created on your platform using destination charges or separate charges and transfers, with or without on_behalf_of, your platform balance is automatically debited for the disputed amount and fee. When this happens, your platform can attempt to recover funds from the connected account by reversing the transfer either through the Dashboard or using the API.

If theres a negative balance on the connected account, Stripe attempts to debit the external account on file for the connected account only if debit_negative_balances is set to true.

If youre using Express or Custom legacy account types, your platform is responsible for disputes and fraud. For more details, see Disputes and fraud and Dispute categories, and follow Best practices for risk management. You can also use Fraud Stripe Apps to automate dispute management and handle chargebacks.

Payment methods

For most payment methods, you can control which ones your connected accounts accept. (Some payment methods can only be enabled by the account owner.) If you use dynamic payment methods, you can configure one or more payment method configurations for your connected accounts that use either direct charges or indirect charges with on_behalf_of. Connected accounts using indirect charges without on_behalf_of use the payment method configurations that you set up for charges on your platform.

For more information, see Manage payment methods for connected accounts.