Stripe next-day settlement: useful or awful?

Before you click ‘enable’ on that Stripe email about faster deposits, there’s something you need to know.

This came up when a couple of clients got an email from Stripe saying they have a new feature called “next day settlement”.

This is where, instead of them depositing the money 2-7 days after you’ve charged your client or customer, they’ll deposit the next business day.

In exchange, they’ll charge a small-sounding 0.6% fee.

It sounds small, but it’s actually a lot of money.

The effective interest rate is really, really awful.

If you get the money on a Wednesday instead of a Thursday, that’s like paying 140% interest per year, the worst interest rate you’ll ever pay.

Even if you get the money on a Friday instead of a Monday, that’s 55%.

Credit cards range from 12% to 25%.

However, even awful interest rates have their place.

If cash is really tight for you, or you need the money by a certain deadline, maybe you’ll use this feature.

Ideally, you don’t get into a position like that.

And you certainly don’t leave this feature constantly enabled. It’s a great way to bleed a lot of money out of your business.

The main point I want to leave you with is that even small amounts, like a 0.6% fee, can be a terrible financial deal.

Send me a message on Instagram if you have any questions.