Defeating the Rolling Reserve Trap
During the past, high-risk merchant accounts had a rolling reserve of 5-10% for 180 days, which severely hampered their cash flow. Today the new thoughts have come along, setting up alternative structures that either remove or reduce reserves. Some offshore processors, such as PaySpacelv, offer reserve insurance—the merchant pays a small premium fee (0.5%-1%) to avoid holds. Others employ a “reserve-sharing” technique in which the processor accepts a portion of the liability attached to a collateral posting. The latest approach uses real-time scoring in which funds are released daily in low-chargebacks-risk cases. CoinPayments, a cryptocurrency payment gateway, offers zero reserves for stablecoin settlement. Even mainstream providers can forego reserves after 6-12 months of clean processing under 0.5% chargeback ratios.
Strategies to Reduce Existing Reserves
Establish a strong argument for a gradual reserve decrease by demonstrating high levels of chargeback activity (less than 0.7%) over the past 90 days. Ask for graduated releases, as most processors will release 25% of reserves after 60 clean days. Use high-risk payment facilitators like Square and PayPal, which usually hold no reserves (though they may freeze funds). For multi-account merchants, spread volume among providers to lower individual reserve amounts. Certain high-risk specialists fund reserve financing—advancing on held funds at a fee. Bring along that reserve reconciliation tracking—after processor audits, a lot of merchants find that they have already suffered over-withholdings.
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