Rolling Reserve

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Rolling Reserve

High risk businesses in need of payment processing services may find themselves having to agree to a rolling reserve. 

A rolling reserve is a way for merchant account providers and payment processors to protect themselves from possible loss of funds if a business has too many chargebacks. 

How do Rolling Reserves Work? 

When a business has a rolling reserve in place, the payment processor keeps back a portion of its sales in a separate account each month. This could happen for six months before the money becomes “rolling.” 

Let’s say a business has a rolling reserve in place that begins in January. Money is added to the reserve account each month, and then in July, the money that was held back in January gets released to the business and deposited in their business bank account. 

How Much Money is Put Into Rolling Reserves? 

There are a number of factors that could determine how much money a business is required to keep in a rolling reserve account. Each payment processor may have its own policy, or it could depend on the industry and how high risk a business is. 

It is not uncommon for merchant service providers to require 10-15% in some cases. 

Are Rolling Reserves Permanent? 

Not necessarily. 

If a high risk business is starting over with a new payment processor, it will likely need to have rolling reserves in place. 

But once some time has gone by, and a positive payment processing history has been established, the requirement may be relaxed. Of course, if a need for reserves arises again, it could be put back in place. 

What Types of Businesses Need Rolling Reserves? 

In most cases, rolling reserves will be required for high risk businesses. But there are some other reasons they might be needed, such as: 

• If a business has a history of a high number of chargebacks.
• If the business has large ticket prices.
• If the business has a high processing volume each month. 
• If the owner of the business has poor or bad credit. 
• If a business has no payment processing history at all. 

The following are all examples of business industries that are considered high risk (though this is not an exhaustive list): 

• Dating sites
• Hotels
• Firearms dealers
• Travel-related businesses
• Vape companies
• Cannabis and hemp retailers
• Credit repair
• MLMs 

Other Types of Reserves

There are a few other types of reserves that may be instituted as well. 

Capped Reserves

Some processors will require that a certain percentage of your sales be held in a reserves account, but that account is capped at a pre-determined amount. No other money will be added. 

For example, a business might do $20,000 in sales per month and have a 25% capped reserve. Once $5,000 has been collected, that money is held until the account closes, and no other funds are held in reserve. 

Up-Front Reserves

Some businesses may need to provide a certain amount of money before they can begin processing payments. This is called an up-front reserve. 

If that is not possible, some processors may agree to hold 100% of sales until the requirement is met. 

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