Covering Expenses: Reserve Funds Held By Processors

Global Legal Law Firm has been representing clients in electronic payments litigation cases since 2008. Located in San Diego and Los Angeles, we serve clients in Southern California and throughout the United States.

If you have been encountering problems with any kind of payment processing, our experienced attorneys will give you the guidance you need to resolve your reserve fund dispute. With our lawyers on your side, you will be able to confidently navigate the bumpy landscape of credit card payments.

Our law firm has advised a wide variety of entities, from agents to credit card companies to Independent Sales Organizations (ISOs). We have also worked with a wide variety of high-risk merchant accounts and have the expertise and relationships to help you in sticky situations.

Read on to learn more about why you need a reserve fund and how our skilled attorneys can help.

Reserve Funds – Everything you need to know

What is a reserve fund?

A reserve fund is a type of savings account that an organization puts aside to meet future obligations or costs.

Why Does My Company Need a Reserve Fund?

Reserve funds are always a good idea for credit card payments, particularly for businesses. When a customer buys one of your items and pays using a credit card, the credit card’s bank will give them the money to cover the price. Afterwards, the customer will have to pay the bank back.

However, your own bank will also be giving you credit for this purchase. This is where having a credit card reserve fund will come in handy, since you may be responsible for the chargeback if the customer suddenly decides to dispute the purchase. If that happens, a credit card reserve fund can help you cover these unexpected expenses.

How Much Money Will the Processor Require in the Reserve Fund?

If you are a high-risk merchant, your bank will probably require you to have a minimum reserve fund to protect itself. Low risk merchants are not usually required to set aside a reserve fund unless they have a low credit score. The amount of the rolling reserve will be determined by the processor based on a number of different factors. Some reasons why your business may be deemed as a high-risk merchant account are as follows: high ratio chargebacks, accepting foreign currency sales, poor or nonexistent credit history, and poor credit card processing history.

Otherwise, your bank may just require you to have a rolling reserve, which takes 5 to 10 percent of your credit card sales and holds them for some time before releasing the funds to you. A rolling reserve will not require you to have a certain amount of held funds in your reserve account.

Who is Considered a High-Risk Merchant?

An example of a business that would be considered a high-risk merchant is someone in the tobacco and e-vaping industry due to the ong history of fraud found in this industry. Many tobacco merchants have an above average rate of credit card reversal. This usually ends up with a large number of customers who file chargebacks. Some others are nutraceutical companies and adult-themed websites, to name a couple.

There are many other industries or business models that have higher than average chargebacks. Here is a list of common types of bu


How Global Legal Can Help You

Our skilled electronic payments litigation attorneys who have extensive experience in getting reserve funds back to merchants will help you with any issue or question you have about reserve funds.

‌Contact us if you have:

  • received an unexpected number of chargebacks
  • been placed on high-risk lists
  • have questions about a potential contract with a credit card processor
  • experienced other issues with reserve funds held by processor

We will go through your documentation to understand where the unjust charges may have come from. Charges can happen 180 days after the transaction, so you should bring us as many recent records as possible, so we can gain a more thorough understanding of your situation.

If your receipts and other documentation suggest that you do owe chargebacks and you lack sufficient reserve funds to cover them, we can craft a tailor-made plan to get you back on track.

To find out more, book a free 15-minute consultation with our attorneys. During this consultation, not only will you learn more about your current situation, but you will also learn how we can help solve your electronic payment issues. Call now for more information.

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