What is a rolling reserve?
A share of each transaction, often 5% to 15%, that the acquirer holds for a set period, typically 90 to 180 days, before releasing it. It covers future chargebacks and refunds. High-risk merchants and rising dispute ratios lead to higher reserves, delayed payouts, or both.
In detail
A share of each transaction, often 5% to 15%, that the acquirer holds for a set period, typically 90 to 180 days, before releasing it. It covers future chargebacks and refunds. High-risk merchants and rising dispute ratios lead to higher reserves, delayed payouts, or both.
How rolling reserves work
Acquirers hold back part of the funds against future chargebacks and refunds. Rolling reserves typically withhold 5% to 15% of each transaction for a set period, with 180 days or more for high-risk sectors. Capped reserves stop at a ceiling, and up-front reserves are deposited before processing starts. A rising chargeback ratio is the usual trigger for a larger reserve or a delayed payout.
Reserves in the payout
The reserve is deducted from the merchant payout: the acquirer or PayFac pays the merchant gross sales minus fees, refunds, chargebacks and any reserve, on the contracted schedule. Providers should use reserves as a dial, not a punishment, and set the payout schedule per merchant from risk data, chargeback ratio and tenure.
More detail in our #PayDecoding episode on Settlement.