Holdback Definition

Merchant Account Holdback Explained:

What is a Holdback? A merchant account “Holdback” is a portion of money held by the processor from a merchant’s credit card sales for the purpose of establishing a Cash Reserve. Processors may establish Holdbacks for new merchant accounts when businesses have poor credit history, or with existing accounts that engage in sales that have a higher than normal risk of Chargebacks and/or fraud. The funds from Holdbacks are held to cover the losses processors suffer when merchants becomes insolvent and have excessive Chargebacks or fraud on their account.

The most common method for establishing a Holdback is for the processor to hold 5%-10% of each sale that passes through the merchant account. In some cases, a Holdback will be discontinued once a Cash Reserve of a specified dollar amount is reached. In other cases, a Holdback can remain indefinitely to maintain a “Rolling Reserve.” The funds from a Holdback can often be held for as long as 180 days before being released to the merchant.

Holdbacks are often established suddenly and by surprise to the merchant, with funds being held before the merchant can react. This practice, combined with a long holding period, causes many merchant great confusion and frustration. It is not surprising that many of the complaints against merchant account providers can often be traced to Holdbacks that the merchant did not expect.

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Why I'm Qualified to Write About Credit Card Processing and Merchant Account Services

I'm a former credit card processing sales director who left the industry because I didn't like how it takes advantage of small business owners. It feeds like a leech on businesses and thrives by imposing fees that are nearly impossible to comprehend. Seeing a need for change, I left and built this website help business owners better understand the industry, research merchant services providers, and get refunds of excessive merchant account fees. My experience of working "behind the curtain" in the industry, and using that knowledge for good, has resulted in millions of dollars returned to hard-working small business owners as well as enterprise-level companies.

From the time that I starting working in the merchant services industry to when I left to create this website, I've been on the pulse of payments for nearly 15 years. It didn't seem fair to keep this "insider" knowledge to myself. To lift the fog, I've reviewed hundreds of companies, read thousands of user reviews, and learned the pricing tricks of every provider. If you have questions about credit card processing, you can find the answers on this website.

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