Risk & Compliance
Rolling Reserve
Definition
Rolling Reserve a percentage of processing volume held by the acquirer as security against chargebacks and refunds. Typically 5-15% held for 6-12 months before release. The reserve 'rolls' as new funds are held and old funds release. Affects cash flow significantly for growing businesses. Reserve terms are negotiable and often reduce after establishing clean processing history. Alternative structures include capped reserves and upfront deposits.
Related Terms
Holdback
Funds retained by the acquirer from merchant settlements as security. Similar to rolling reserve but may have different release terms. Some holdbacks are permanent until account closure; others release after a fixed period. May be expressed as a percentage of volume or a fixed amount. Common for high-risk merchants and new accounts without processing history.
High-Risk Merchant
A classification by acquirers for merchants perceived as having elevated risk of chargebacks, fraud, or regulatory issues. Common high-risk verticals: gambling, forex, adult, nutraceuticals, crypto, travel, and subscription billing. Consequences include higher rates (1-3% premium), rolling reserves, volume limits, and limited acquirer options. Classification is risk assessment, not legitimacy judgment.
Merchant Account
A bank account that enables a business to accept card payments. The merchant account holds funds from card transactions before settlement to the merchant's business bank account. Obtaining a merchant account requires underwriting by an acquirer. High-risk merchants face more scrutiny and may require specialized acquirers. Terms include processing limits, reserve requirements, and fee structures.
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