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HIGH RISK MERCHANT ACCOUNT RESERVE

A reserve in a merchant account is a one part of the revenue of each month for the processing of the credit card transactions of the merchant which may be held by the credit card processing company. This is done as a precaution so that when possible losses and chargebacks occur, the company which processes the credit cards can claim the loss from the reserve. This is done mainly in the case of high risk accounts. After the successful completion of a pre-determined amount of time, the reserved will be given backs to the dealers. In rolling reserves, a reserve is usually held each month for some time period. In the following month, the precious month’s reserve will be released to account holder. This process is repeated very month until a reserve no longer exists.

A few businesses come under the high risk category when compared to other businesses. These high risk businesses are known to generate a high level of chargeback. All the dealers who operate in an environment which is non-face-to-face are categorised as high risk dealers. ECommerce and direct marketing are examples that fall in this category. However, only a minor fraction of high risk businesses are asked for merchant account reserves. In most cases, the businesses which involve high volume processing have larger average ticket. A new business which operates on the internet is also a candidate for reserves. High risk merchant accounts which do no have an American processor are most likely to be asked for reserves if they are applying for offshore providers.

A merchant will be asked for a reserve if a not-so-good credit history is prevalent. In such cases, personal guarantees may also be asked. When reserves are required, merchant accounts for small businesses need to have at least a 20% reserve balance. Usually, new traders can build their reserves by sending across transactions that are yet to be withdrawn till the required balance for reserve is achieved. After the minimum reserve balance is reached, a trader can withdraw his/her excess funds into the checking account.

Each and every credit card processor for merchant accounts has a varied underwriting policy. Hence, it is best to request for a number of proposals for the processing of credit cards before the final decision is made. When the several proposals are looked at, one may come across a credit card processor which does not have the reserve requirement. Also, a trader needs to know that the reserve fund is an amount which is kept with justifiable reasons. It can be summarised that a merchant account reserve is a fallback system for the acquiring banks and merchant account providers. However, during the selection process for a merchant account provider, the merchant account reserve is one among several other factors that need taken into account. Other important factors which need to be considered before selecting an account include services for fraud prevention, tools for risk and chargeback management, customer service, processing costs, and reporting capabilities during transactions.

Contact one of our helpful account representatives to assist you in the setup of a high risk merchant account or offshore merchant account for a high risk merchant.