Definition
What is an application fee on Stripe Connect?
An application fee is the platform’s cut of a transaction on Stripe Connect — collected at charge time as its own object, separate from the funds destined for the connected account. It is the mechanism behind "take rate": marketplace commissions, SaaS-reseller margins, booking fees. Understanding its lifecycle matters because its default behaviour on refunds — staying yours — creates more silent margin distortion than any other Connect parameter.
Mechanics
Specified at charge creation (amount or percent); lands as an application_fee object with its own balance transaction; paid out with platform settlements. Processing-cost economics vary by charge model — worth verifying who effectively bears card fees in your configuration rather than assuming.
Refund lifecycle — the part that bites
refund_application_fee defaults false: refund a charge and your fee survives unless told otherwise. Deliberate retention is defensible policy when disclosed; accidental retention contradicts terms and inflates effective take rate on surviving revenue. Proportional return math matches Stripe’s rounding (half-up) to stay cent-exact.
Currency notes
Zero-decimal currencies (JPY, KRW…) express amounts without minor units — dividing by 100 for display errs by 100×. Three-decimal outliers exist too (BHD, JOD…). Fee arithmetic inherits whatever unit confusion surrounds it.
Common questions
Is the fee my revenue or Stripe’s?
Yours. Stripe bills processing costs separately according to your charge model — the fee object is purely platform revenue.
Percent or flat?
Either, set per charge at creation. Percent scales with ticket; flat suits fixed-service models.