What is a Merchant Account Rolling Reserve?
Rolling reserves are a way for payment processors to protect themselves from risk. They work by holding back a portion of your business’s sales to help cover any future problems like chargebacks or fraud. This amount is stored in a separate account controlled by the payment processor and is typically held for a predefined period. After this period, the funds are released back to the merchant in increments.
Do I Need a Rolling Reserve For My Business?
Rolling reserves are more commonly for businesses operating within industries considered to be high-risk or those with a history of financial instability. High-risk industries often include travel, telecommunications, and adult entertainment, where the probability of transaction disputes is relatively high. However, businesses that are new or lack a substantial credit and transaction history are also frequent candidates for rolling reserves.
How to Negotiate Terms of a Merchant Account Rolling Reserve?
When entering into a merchant account agreement that includes rolling reserves, it is advisable for business owners to engage in negotiations to secure favorable terms. Factors such as the percentage of sales held in reserve, the duration of the hold, and the release schedule of the funds should be discussed thoroughly. Businesses can often present evidence of financial stability, lower chargeback rates, or a solid transaction history as leverage to argue for lower reserve requirements.
