Reserve Account
Funds held by a processor as security against potential chargebacks and fraud losses.
What is Reserve Account?
A reserve account is a fund held by a payment processor or acquiring bank as security against future chargebacks, fraud losses, or merchant insolvency. Reserves can be funded upfront, built through rolling holdbacks (a percentage of each deposit), or capped at a specific amount. Common in high-risk industries or for new merchants without processing history, reserves provide the processor financial protection while allowing the merchant to process.
Why It Matters
Reserves affect your cash flow by holding back funds that would otherwise be deposited. Understanding reserve terms is essential when evaluating processors. As you build positive history, you can often negotiate reserve reductions or elimination. Excessive reserve requirements from one processor may mean shopping for alternatives.
Related Terms
Rolling Reserve
A reserve that holds back a percentage of deposits for a set period before releasing them.
Merchant Account
A bank account that allows businesses to accept credit and debit card payments.
Underwriting
The risk assessment process for approving merchant accounts and setting terms.
Chargeback
A forced transaction reversal initiated by the cardholder's bank, returning funds to the customer.
Frequently Asked Questions
Reserves protect the processor if you go out of business or have excessive chargebacks. New merchants, high-risk industries, and those with concerning processing history typically face reserves.
Yes, typically after demonstrating stable processing and low chargebacks. Six months to a year of positive history usually qualifies you for reserve reduction or release.
Varies widely: 5-10% for moderate risk, up to 100% for very high risk. Reserves may cap at a specific dollar amount or be unlimited based on processing volume.
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