Rolling Reserve
A reserve that holds back a percentage of deposits for a set period before releasing them.
What is Rolling Reserve?
A rolling reserve is a type of reserve where a percentage (typically 5-10%) of each settlement is held for a defined period (commonly 90-180 days) before being released to the merchant. Unlike fixed reserves that reach a cap, rolling reserves continuously cycle—new funds are held as old funds are released. This provides ongoing protection against chargebacks while eventually returning funds to the merchant.
Why It Matters
Rolling reserves impact cash flow predictably—you can plan for a consistent percentage being held. After the initial holding period, releases become steady as the reserve "rolls." Understanding the hold period and percentage helps with cash planning. These are common for moderate-risk merchants as an alternative to larger upfront reserves.
Related Terms
Reserve Account
Funds held by a processor as security against potential chargebacks and fraud losses.
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.
Settlement Time
The time between processing a transaction and receiving funds in your bank account.
Frequently Asked Questions
Example: 10% rolling reserve with 90-day hold. Each deposit has 10% held. After 90 days, that portion releases. Once established, you have steady releases offsetting new holds.
It depends. Rolling reserve returns funds eventually; fixed reserve may hold funds indefinitely. Rolling creates predictable cash flow once established. Fixed reserve impacts upfront cash more.
Yes. Reserve percentage and hold period are negotiable, especially with positive processing history. Six months of low chargebacks often justifies better terms.
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