What a Rolling Reserve Means for You
A rolling reserve holds back part of each day's card sales and pays it back later. Here is how the hold works and who holds the money.
A rolling reserve takes a slice of your card sales and holds it back for a while. PayPal's user agreement says money under a reserve shows as pending. Here is what a rolling reserve is and how it works day to day.
What a rolling reserve is
PayPal's user agreement gives a plain meaning. It says a rolling reserve holds a share of each day's sales. It pays that money back later on a set schedule. The same agreement calls rolling reserves the most common type of reserve.
Why acquirers and payment facilitators use reserves
A reserve is money set aside as a backup. Stripe's agreement says a Reserve is collateral funds Stripe holds and controls to cover liabilities or potential liabilities the user incurs.
Visa's standards back this up. They say an acquirer should raise the reserve or use other risk tools when a merchant's credit policies fall short. Visa's guide for payment facilitators says they may use merchant reserves to cut their risk of loss.
Reserves are not a way to sign anyone. Visa's guide says merchants should be underwritten on their merits, and reserves are not a reason to onboard unreasonably high-risk merchants.
What Visa's standards say about reserves and settlement
Visa's standards say an application decision can be approval, decline or conditional approval with exposure mitigation strategies such as reserves or holds. So a reserve can be a condition of approval.
On settlement, Visa's standards say acquirer payments to a merchant equal the transaction totals after deducting credit transactions, discounts, disputes, agreed fees, or reserve funds. The reserve comes out before the money reaches you.
Visa's standards also say the acquirer must send you your settlement funds. It must keep your funds safe and handle them with care. The acquirer answers for your money.
Who holds the money under a payment facilitator
This is where the rules get strict. Visa's guide says reserve funds belong to the sponsored merchant and must be held and controlled by the acquirer. Visa prohibits payment facilitators from holding and controlling merchant reserves.
So under a payment facilitator, the money is yours. But the bank behind it must hold the money. The facilitator cannot keep it in its own accounts.
How a reserve shows up in your settlement and account
Your daily deposit shrinks by the reserve amount. PayPal's user agreement says funds under a reserve are shown as pending and PayPal notifies you of the reserve's terms. On PayPal, check for pending amounts and read PayPal's notice.
The reserve amount can change. Visa's standards say merchant agreements should detail which actions the acquirer can take, such as changing reserve requirements or adding holds on funds. Your terms should tell you this can happen.
What your merchant agreement should say about reserves
Read your agreement before you sign. It should list what the acquirer can do, such as change the reserve or hold funds. If the agreement is silent on reserves, ask before you sign, not after.
A reserve is not always a sign your business was labeled high-risk. It can be a condition of approval. Read why banks watch payment processors for the bank's side.
Related reading
If you sell by phone, read billing authorization on phone sales.