By: Money Navigator Research Team
Last Reviewed: 13/01/2026
FACT CHECKED
Quick Summary
Online card payments can still be approved at checkout when a business account is frozen, because approval (authorisation) and “getting the money” (settlement and payout) are separate steps.
The most common disruption is payouts being delayed, held, or becoming inaccessible, often alongside tighter processor controls such as reserves and limited refund functionality.
That can increase customer complaints and the likelihood of disputes/chargebacks if goods or services cannot be delivered or refunded on time.
This article is educational and not financial advice.
Online card payments have two “truths” during a freeze
When people say “online card payments”, they usually mean one of two things:
Checkout acceptance: the customer pays successfully (authorised/captured).
Cash availability: the business receives usable funds in its bank account.
In card processing terms, settlement is the stage where card transactions are finalised and funds move through the payment chain to the merchant’s bank. Stripe’s explainer on how payment settlement works and how long it takes is a useful reference point for the terminology.
A bank account freeze often bites hardest at the second “truth”: cash availability.
For the wider, non-online-specific picture, see our umbrella guide on what happens to card payments when a business account is frozen.
What a “frozen” account means for online card payments
A freeze usually means the bank restricts some or all transactions while checks or legal constraints apply. Separately, payment providers can apply their own restrictions to merchant accounts if they identify elevated risk.
- The Financial Ombudsman Service summarises typical reasons providers freeze accounts (including suspected fraud, suspected money laundering, or court orders) in its guidance on frozen accounts and blocked payments.
- The FCA has also discussed freezes and restrictions in its report UK Payment Accounts: access and closures (PDF).
A practical implication for online sellers: the freeze can appear in multiple places at once – bank account access, processor payout schedules, and refund/dispute handling.
What usually happens at checkout during a freeze
Online checkouts can continue to approve transactions if the merchant account is still active and the processor is still allowing authorisations/captures.
This is why businesses often report “orders are coming in” while cashflow is tightening elsewhere.
But capture rules and risk controls can tighten
During restriction periods, processors can change how they treat:
higher-value transactions
unusual spikes in volume
certain risk signals (customer disputes, fraud patterns, mismatch rates)
From the business side, this can look like higher decline rates, more “review” statuses, or a sudden inability to take certain transaction types – even though the website and gateway are technically working.
(For in-person acceptance behaviour, which can differ, see do card terminals stop working if a business account is frozen?.)
Where online sellers feel it most: settlement, payout holds and reserves
1) Payouts may be delayed or paused
Even if transactions are captured successfully, the money typically reaches the business through scheduled payouts. If the receiving bank account is restricted, or the processor pauses payouts while checks run, the practical result is delayed cash.
The “where the money gets stuck” mechanics are broken down in card settlement payouts when a business account is frozen.
2) Funds can be held inside the processor balance
Some restrictions show up as funds accumulating in the processor dashboard rather than arriving in the bank account. This can happen alongside additional review steps, held balances, or changes to payout cadence.
For the common drivers behind this behaviour, see why payment processors hold payouts during account restrictions and our provider-focused explainer on Stripe and PayPal holds during a business account freeze. PayPal’s own overview of why funds can be unavailable or placed on hold shows how processors describe these controls from their side.
3) Reserves can be introduced or increased
A reserve is a portion of funds held back to manage potential liabilities such as refunds and chargebacks. Stripe describes reserves in its support material on reserves.
Reserve behaviour (including why it can rise during restrictions) is covered in:
Summary table
| Scenario | Outcome | Practical impact |
|---|---|---|
| Online checkout still authorises/captures | Customers can pay successfully | Orders rise while cash availability may fall behind |
| Processor pauses payouts | Funds don’t reach the bank on schedule | Working capital tightens; reconciliation becomes harder |
| Bank account cannot receive/use funds normally | Payouts may bounce, fail, or be inaccessible | Supplier payments, payroll timing and tax payments become harder to manage |
| Reserve introduced or increased | A portion of takings is held back | Net cash received decreases; delayed access becomes normalised |
| Refund functionality constrained | Refunds slow or fail | Complaints rise; dispute likelihood increases |
| Dispute volume rises | Chargebacks become more frequent | Funds reversed; fees and admin overhead increase |
Refunds: the fastest way online freezes turn into customer escalation
Refunds are where online sellers often feel the restriction most sharply, because refund processing depends on:
available funds (or available balance within the processor)
permissions under the merchant account status
the operational ability to send money back out
If refunds are delayed, customers may dispute transactions through their issuer rather than waiting. Refund handling is covered in card refunds when a business account is frozen.
The legal framework around execution, authorisation concepts and related obligations sits within the Payment Services Regulations 2017 (PDF).
A freeze does not automatically resolve faster because a framework exists; it does shape how payment-service issues are described and handled in formal terms.
Disputes and chargebacks: why online is more exposed during restricted periods
Online (card-not-present) businesses are often more exposed to disputes during disruption because fulfilment, delivery expectations, and refund timelines are central to the customer experience.
UK Finance explains the chargeback concept and notes it is scheme-based (not a legal right) in its guidance on chargeback and Section 75. Card scheme rules themselves can be highly detailed; Mastercard publishes an extensive reference in its Chargeback Guide (Merchant Edition) (PDF).
For how disputes commonly interact with restrictions (including cashflow and reserves), see chargebacks when a business account is frozen.
Scenario Table
| Scenario-level | Process-level | Outcome-level |
|---|---|---|
| Restriction triggered (bank and/or processor) | Transaction permissions and payout rules change | Payout delays; funds may be inaccessible |
| Online sales continue | Settlement completes but release rules tighten | “Revenue” and “cash” diverge |
| Refund demand increases | Refunds depend on permissions and available balance | Refund backlog; customer escalation |
| Disputes increase | Chargeback cycles apply through issuers/schemes | Funds reversed; costs and reserves rise |
| Restriction lifts vs relationship exit | Controls removed or account ends | Payouts normalise, or payment rails must be re-established |
Can a new bank account fix online card payment disruption?
A new bank account can change where payouts are sent only if the processor permits updating payout details and completes any checks it applies to that change. Even then, if the restriction is driven by unresolved verification, dispute volume, or broader risk controls, payout holds and reserves may remain in place.
This is why “opening an account” and “restoring normal payouts” are separate questions. For the account-opening angle, see can you open a new business bank account if one is frozen?
Compare Business Bank Accounts
Business account providers differ in onboarding friction, verification depth, and how quickly payment rails can run smoothly once an account is open. A neutral overview of provider categories and key considerations is in our hub on business bank accounts.
(If you’re trying to distinguish “temporary restriction” from “relationship exit”, see the difference between a frozen and closed business bank account.)
Frequently Asked Questions
Sometimes. Online payments can still be authorised and captured because checkout approval is not the same step as settlement and payout to the business bank account.
The practical issue is often what happens after capture: payouts can be delayed, held, or become inaccessible, depending on the type of restriction and whether the processor has also applied controls.
In most setups, funds move through the acquirer/processor and then pay out to the nominated bank account on a schedule. If the bank account is restricted, that last step may fail or the funds may arrive but remain unusable.
In other cases, the processor holds funds within the platform balance while review steps run, so the business can see transactions in reporting but not access cash in the usual way.
A gateway can continue to send transactions even if the underlying merchant account is restricted. That means the “website is taking payments” symptom can exist alongside “payouts are blocked”.
Gateways do stop being effective when the merchant account is paused or the processor blocks authorisations/captures – at which point declines rise or payments fail at checkout.
Recurring payments may continue to be attempted, but outcomes vary. Some merchants see subscriptions still charging while payout access is constrained; others see increased declines if the processor tightens risk controls.
Operationally, recurring charges without predictable payout access can increase refund pressure and dispute risk if service delivery is interrupted or customers request cancellation and refunds.
Not necessarily. A payout delay is often about timing or a pause on releases. A reserve is a policy that holds back a portion of funds to cover potential liabilities like refunds and chargebacks.
Both can happen together in restriction periods, which is why online businesses sometimes see a compound effect: payout schedules slow and net cash received reduces.
Refunds can become constrained if available balances are held, reserves are increased, or the merchant account has limited permissions. That can delay refunds even where the business intends to issue them.
Delayed refunds commonly increase customer escalation, because customers often move from “waiting” to disputing once timelines feel uncertain.
It can. If delivery is delayed, communication breaks down, or refunds are slow, customers may dispute through their issuer. Chargeback is scheme-based and depends on the reason and evidence.
From a business perspective, rising disputes can trigger tighter processor controls and larger reserves, which can further delay cash availability.
Changing payout details can help in some cases, but processors often apply checks before permitting payout account changes, and restrictions can delay or prevent those changes being applied.
Even where payout details change successfully, if the underlying trigger is unresolved (verification gaps, dispute patterns, or broader risk concerns), holds and reserves can persist.
Sometimes. Firms may limit disclosures during certain compliance or legal processes. That can leave a gap between the symptom (held payouts) and the information given.
Where the dispute is about handling, proportionality, or communication, the complaints pathway and timelines are outlined by the Financial Ombudsman Service in its guidance on frozen accounts and blocked payments.
Not always. Even when a bank restriction is lifted, processors may keep enhanced controls in place temporarily (for example payout cadence changes or reserves) depending on risk signals and operational review steps.
If the restriction leads to a relationship exit (account closure or merchant account termination), then “normal” may not return on the same setup, because payment rails may need to be re-established elsewhere.
Online payments make freezes feel confusing because the customer journey can remain intact while the cash journey breaks.
A checkout can authorise and capture transactions, dashboards can show revenue, and yet funds can be delayed or inaccessible due to payout holds, reserves, or restricted bank-account access.
The hidden mechanism is that restrictions often shift risk up the chain: once refunds and disputes start rising, processors frequently tighten payout rules to contain potential liabilities.
That can widen disruption beyond the original trigger, especially for online businesses where customer expectations are tightly linked to delivery and refund speed.