What Is a Rolling Reserve? And Why It Matters for U.S. Payment Processing!
If you’re a U.S.-based business accepting credit card payments or electronic check Payments, you’re likely to come across the term “rolling reserve.” While it may sound technical, understanding what a rolling reserve is and how it affects your cash flow is crucial for your operations—especially if you’re looking to grow, expand, or scale your business.
Let’s break down:
- What a rolling reserve is
- Why payment processors use it
- Who needs to worry about it
- How does it affect your business’s cash flow
- And how can you manage or avoid it
Let’s dive in with clear, simple explanations, keeping in mind that we’re addressing U.S. business owners and the U.S. payment processing landscape.
What Is a Rolling Reserve?
A rolling reserve is a security deposit held by your payment processor. When your customers make payments to your business via credit card or eCheck, a certain percentage of the funds—typically 5% to 15%—is withheld by the payment processor. This amount is held back for a specific period, usually 90 to 180 days.
After that time, the withheld funds are released back to you, but they’re released on a rolling basis. The term “rolling” comes from the fact that the funds are gradually returned as time progresses.
📌 Example:
Let’s say your business earns $10,000 in monthly sales. If your processor applies a 10% rolling reserve for 90 days, they would hold back $1,000. After 90 days, you would get that amount back—unless a chargeback or dispute occurs during that period.
Why Do Payment Processors Use a Rolling Reserve?
Payment processors are taking on significant financial risk when handling your business’s transactions. If a customer disputes a charge or fraud is detected, the processor is responsible for returning that money—sometimes even after your business has already spent it.
A rolling reserve acts as a buffer to help cover:
- Chargebacks
- Refunds
- Fraud-related losses
- Unexpected account closures
This is particularly important for high-risk industries where chargebacks and fraud are more likely to occur, as processors want to ensure they have enough funds to cover potential financial losses.
Who Holds Funds?
Not all payment processors in the U.S. use a rolling reserve, but many do, especially those serving high-risk businesses. Here are some examples of U.S.-based payment processors that hold funds as part of a rolling reserve:
1. High-Risk Processors:
For businesses in high-risk industries like online gaming, CBD products, or nutraceuticals, processors will often require a rolling reserve. For example, processors like PayPal or Square may hold a portion of the funds from businesses in these sectors to mitigate the risk of chargebacks or disputes.
2. Credit Card Processors:
Large, traditional credit card networks like Visa, Mastercard, or American Express may also withhold funds for U.S. businesses if they have a history of chargebacks, fraud, or other issues. They typically apply rolling reserves to reduce the financial risk to the processor.
3. Startups or New Businesses:
New U.S.-based businesses or startups without an established processing history are often placed under closer scrutiny. As a result, processors may hold back a percentage of funds until your business has built up a reliable reputation. Stripe and Braintree, for example, may apply rolling reserves for newly registered businesses.
But not all processors apply rolling reserves. For instance, eCheckplan, a popular payment solution for U.S. businesses, doesn’t apply any rolling reserve on funds. eCheckplan helps U.S. businesses process payments seamlessly without withholding money, ensuring cash flow remains predictable and business operations can continue smoothly.
How Does a Rolling Reserve Affect U.S. Businesses?
A rolling reserve can significantly impact your cash flow. For U.S. businesses—especially small or seasonal ones—having a portion of your funds withheld can limit your ability to:
- Pay employees
- Purchase inventory
- Cover overhead costs
- Invest in marketing and growth
💡 Real Insight: A survey conducted by the Electronic Transactions Association (ETA) found that approximately 20% of small businesses in the U.S. face cash flow challenges due to rolling reserves. For new businesses, this could mean having to wait up to 180 days to access those funds, creating delays in important financial decisions.
That’s why it’s important to understand your processor’s rolling reserve terms upfront—especially when your business depends on timely access to funds.
Can You Negotiate or Avoid a Rolling Reserve?
Yes, it’s possible to negotiate the terms or avoid a rolling reserve altogether, especially if you have:
- A solid business track record
- Low chargeback rates
- A stable sales volume
✅ Build a Positive Processing History:
The better your history (low chargebacks, stable volume, and few disputes), the more leverage you’ll have when negotiating a lower or removed reserve percentage.
✅ Provide Additional Documentation:
If you’re a new business with strong financials, business plans, or previous experience in a similar field, you can provide this documentation to your processor. Some U.S. processors may be willing to waive the reserve entirely or reduce the hold period.
✅ Choose the Right Payment Processor:
Not all payment processors in the U.S. apply rolling reserves, and some may offer more flexibility with their terms. For example, eCheckplan offers U.S. businesses transparent payment processing with no rolling reserves, ensuring you get paid faster and have consistent access to your funds.
Rolling Reserve vs. Other Types of Reserves: –
It’s important to differentiate rolling reserves from other types of funds held by payment processors may apply. Here’s a quick comparison:
| Type of Reserve | Description |
| Rolling Reserve | A percentage of your sales is held and released over a set time period, like 90 days. |
| Upfront Reserve | A fixed amount is held upfront as a security deposit. |
| Capped Reserve | Funds are held until a specific amount is reached, and then no more is held. |
For most U.S. businesses, the rolling reserve is the most common and is based on ongoing sales and risk factors.
Tips to Manage a Rolling Reserve: –
To ensure your business can handle a rolling reserve, here are some practical steps:
- Plan for Reduced Cash Flow – Factor in your rolling reserve when creating your business’s financial forecast.
- Minimize Chargebacks – Handle disputes quickly and offer clear refund policies to reduce the likelihood of chargebacks.
- Track Reserve Releases – Keep track of when funds are released to your account to stay on top of your cash flow.
- Negotiate with Your Processor – Regularly review your reserve terms with your processor, especially as your business grows.
Final Thoughts: Why It Matters for U.S. Businesses
A rolling reserve is essentially a risk management tool for payment processors, but it can be a hassle for U.S. business owners—especially when it affects your cash flow. By understanding how rolling reserves work and why they’re used, you can make smarter decisions about which processor to choose and how to manage your finances.
✅ Looking for Payment Solutions Without Rolling Reserves?
eCheckplan offers U.S. businesses transparent and fast payment processing without the headache of rolling reserves. Get in touch today to learn more about how we can help your business thrive.
Call us at (800) 974-9661 or contact us online to learn more.
