Which mechanism does Stripe use to address negative balances on connected accounts?

Stripe addresses negative balances on connected accounts primarily by debiting the external account on file. This mechanism is crucial for maintaining the financial integrity of the connected accounts within the Stripe ecosystem.

When a connected account has a negative balance, it indicates that the account has incurred expenses, such as chargebacks or fees, that exceed its available balance. To rectify this situation and ensure that the connected account remains operational and compliant, Stripe automatically withdraws the required amount from the external bank account linked to the connected account. This process helps to quickly resolve the negative balance issue without requiring manual intervention from the account holder, thereby streamlining operations and maintaining cash flow.

Employing this approach ensures that account holders remain responsible for their negative balances while also keeping the platform functioning smoothly. This method reinforces the importance of linked external accounts as a financial safety net for managing unexpected costs that can arise during transactions.

The other options, while they may appear relevant, do not effectively address the resolution of negative balances. Simply debiting the platform account could disrupt overall platform finances, while halting payment processing would negatively impact transaction flow and customer experience. Notifications may inform users of their negative balances, but they do not resolve the issue directly, requiring action that could lead to further complications.