Understanding Rolling Reserves
Rolling reserves protect acquirers but impact your cash flow. Here's how they work and how to minimize them.
What is a Rolling Reserve?
A rolling reserve is a percentage of your processing volume that the acquirer holds back as security against chargebacks and refunds. It "rolls" because old reserves release as new ones are created.
How It Works
Example: 10% rolling reserve with 6-month release
- You process $100,000 in January
- Acquirer holds $10,000
- In July, that $10,000 releases
- Meanwhile, February's reserve is held, releases in August, etc.
Why Acquirers Require Reserves
- Chargeback protection: Cover chargebacks if you can't
- Refund coverage: Ensure refund obligations are met
- Business closure risk: Protection if you shut down
- Card network fines: Cover potential penalties
Typical Reserve Requirements
- Low risk: 0-5%
- Medium risk: 5-10%
- High risk: 10-20%
- Very high risk: 20%+ or upfront reserve
Reducing Your Reserve
1. Build History
Clean processing history is your best negotiating tool. Many acquirers reduce reserves after 6-12 months of good performance.
2. Lower Chargebacks
Lower chargeback rates demonstrate reduced risk. Invest in prevention.
3. Negotiate at Onboarding
Reserves are negotiable. Come with clean history and a plan for chargeback management.
4. Review Periodically
After establishing a track record, request reserve reduction. Many acquirers will consider it if you've performed well.
Cash Flow Planning
Reserves impact cash flow significantly, especially for growing businesses. Factor reserve requirements into your financial planning. The money isn't lost - it's just delayed.
Key Takeaways
- Reserves are standard for higher-risk merchants
- They're negotiable and can be reduced over time
- Clean processing history is your leverage
- Plan cash flow around reserve timing
- Don't accept unreasonable terms without pushback
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