The Complete Guide To Rolling Reserves

Merchant service providers sometimes include a rolling reserve clause in their contracts. This clause requires you to set aside a percentage of your credit card sales in a reserve account, essentially holding back part of your revenue.

While a rolling reserve can put a strain on cash flow, there are ways to prepare for and manage the impact.

In this guide, we’ll explain what rolling reserves are, why providers use them, and what you can do if your business is subject to one.

What Is A Rolling Reserve?

A rolling reserve is when your provider withholds a percentage of your card sales (usually 5–10%) and places it in a reserve account to cover potential chargebacks.

The account “rolls” because funds from new sales are added while older deposits are eventually released back to you. Most providers hold funds for 6–12 months before releasing them, though exact timing depends on your contract. Note that funds held in a reserve account do not earn interest.

How Do Rolling Reserves Work?

Processors typically deposit funds from card sales within 1–2 business days, even though transactions aren’t fully settled until the 120-day chargeback window closes. A reserve helps cover chargebacks that happen after you’ve already been paid.

If you can’t cover a chargeback, your provider pulls the funds from the reserve account. This reduces the risk of freezes, holds, or termination, especially with payment services providers (PSPs) like Square or PayPal.

Different Types Of Reserve Funds

There are two common variations of rolling reserves: capped reserves and up-front reserves.

Capped Reserves

With capped reserves, the reserve balance is capped at a percentage (often 50–100%) of one month’s processing volume. Once the cap is reached, no further reserves are withheld.

Example: If you process $5,000/month with a 100% cap, your provider will hold $5,000 and then stop withholding, except for chargebacks. Funds are usually released only when you close the account.

Up-front Reserves

Instead of withholding from each transaction, the provider requires a lump sum before you start processing. This can come from a bank letter of credit, a transfer, or by withholding 100% of your initial sales until the reserve is met.

How Much Is a Typical Reserve Amount?

Most reserves withhold 5–10% of card sales, though terms vary by provider and factors including average monthly processing volume and how long you’ve been in business.

The balance may be variable or fixed, but it generally won’t exceed 100% of your monthly processing volume.

This is in addition to your regular processing fees, monthly account fees, and other account costs.

Can Any Processor Require A Reserve Fund?

Yes. Both traditional merchant account providers and PSPs can require a rolling reserve. Nearly all contracts include a reserve clause, though it only applies if underwriting decides your account needs one.

Reserves are most often required for:

• High-risk businesses
• New businesses with limited history
• Owners with poor personal credit
• Businesses with unusually high chargebacks

Why Most High-Risk Processors Require A Reserve Account

High-risk merchant accounts are more expensive than standard, low-risk accounts. You’ll typically pay higher processing rates and recurring fees, and having a rolling reserve is far more likely.

Not all high-risk accounts require a reserve, but some industries almost always do, including:

• Businesses selling unregulated or poorly regulated products (e.g., nutritional supplements, CBD)

• Industries with high chargeback risk (e.g., credit repair, adult entertainment)

If your business falls into these categories, you’ll likely need to open and fund a reserve account to get approved. Depending on your provider, the reserve may be required for the life of the account, or it could be reduced or removed over time as your business grows and maintains a low chargeback rate.

Can You Negotiate To Remove A Reserve On Your Merchant Account?

Reserves are an underwriting decision, and you can’t eliminate them entirely. However, you may be able to negotiate terms.

The best strategy is to shop around, compare providers, and choose one with terms you can manage.

What To Do If Your Merchant Account Has A Reserve

If you can’t avoid a reserve, plan for it. Here’s how:

• Talk to your provider: Ask clear questions before signing. How long will funds be held? When will they be released? Which transactions are affected? Get specifics in writing.
• Analyze your cash flow: Estimate whether your business can handle reduced cash flow after reserves. If the numbers don’t work, consider delaying card acceptance or exploring financing.
• Plan for shortfalls: If reserves will cut too deeply into your revenue, a working capital loan or similar financing can help bridge the gap until funds are released.
• Think long-term: Reserves may force you to cut costs, boost cash flow, or find new ways to stabilize revenue.

The Bottom Line On Rolling Reserves

Most small, low-risk businesses won’t face a rolling reserve. But if you’re in a high-risk industry, have poor credit, or see frequent chargebacks, it’s a real possibility.

Understanding how reserves work — and how they affect cash flow — is essential before signing up with any provider.

And since reserves stack on top of other processing costs, make sure you’ve done your homework on credit card processing fees to see the full financial picture.