MERCHANT ACCOUNT RESERVE
Merchant account reserve is a part of
the monthly revenue for processing a
trader’s credit card transactions that
may be kept by the credit card
processing firm. The reserve is held as
a precautionary measure so that if
chargebacks or possible losses occur,
the credit card processing firm can
claim the losses from the reserve.
Merchant account reserve is generally
applied to high risk merchant accounts.
Once the pre-determined period is
successfully completed, the reserve will
be handed over to the merchants. This
process of holding back a reserve will
be repeated each month till the reserve
does not exist anymore.
There are a few businesses that are
considered as high risk businesses.
These businesses usually have higher
chargeback levels. Dealers who do not
operate in the face to face environment
are usually categorised as high risk
merchants. Direct marketing and
e-commerce are classic examples of high
risk businesses. However, only a few
high risk businesses are asked for a
merchant account reserve. In most of the
cases, businesses involving high volume
processing have a large average ticket.
New businesses operating online are also
candidates for merchant account reserve.
Merchant accounts falling in the high
risk category that do not have U.S
processors are usually asked for
merchant account reserves if they apply
for offshore merchant providers.
If a trader does not have a good credit
history, he or she will be asked a
merchant account reserve. Such merchants
will also be asked for personal
guarantees. When merchant account
reserves are needed, small business
merchant accounts should have a minimum
20% reserve balance. New merchants can
build their merchant account reserves by
sending their transactions that haven’t
been withdrawn as yet till the needed
reserve balance is achieved. After
reaching the required minimum balance, a
merchant will be in a position to
withdraw the excess funds into his/her
respective checking account.
All the merchant account credit card
processors have an underwriting policy.
Therefore, it is a good idea to ask for
several proposals for credit card
processing before taking a final
decision. When you look at a number of
proposals, you will come across certain
credit card processors who do not
require a merchant account reserve. It
is very important for merchants to know
that the merchant account reserve is an
amount that is kept due to very
justifiable reasons. In short, the
merchant account reserve is simply a
fallback system for the acquiring banks
as well as the merchant account
providers. While selecting a merchant
account provider, there are several
factors that a trader needs to consider
before finalising on a provider.
Merchant account reserve is one of the
factors that need to be considered. The
other factors that are trader needs to
consider include services such as fraud
prevention techniques, chargeback
managements, risk tools, consumer
service, transaction reporting
capabilities and processing costs.
Finally, select a merchant account
provider that meets all the requirements
for your business as well as aids in the
effective running of the business.
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.