Settlement
Rolling reserve
A percentage of each transaction held by the acquirer for a fixed period (e.g. 10% for 180 days) to cover chargeback risk.
A rolling reserve is a risk management mechanism where an acquirer withholds a fixed percentage of a merchant's gross daily processing volume for a predetermined period before releasing it. These funds are held in a separate reserve account to safeguard the acquirer against potential liabilities such as chargebacks, scheme fines, or refunds that the merchant might fail to cover. This is particularly prevalent for businesses classified as high-risk or those with long fulfillment cycles, where the delay between payment and delivery increases the likelihood of disputes. The duration of the hold, often 90 to 180 days, typically aligns with the timeframes during which cardholders can initiate a dispute under Visa or Mastercard scheme rules. While this practice impacts the merchant's immediate cash flow, it allows the acquirer to offset financial exposure without requiring a large upfront fixed deposit or collateral.
Frequently asked
How does a rolling reserve differ from a fixed reserve?
A rolling reserve is dynamic, with funds constantly being withheld from new sales and older funds being released after the hold period expires. In contrast, a fixed reserve requires the merchant to provide a specific total amount at the start of the contract, which is held in full until the merchant account is closed or the risk profile changes significantly.
Can a merchant negotiate the percentage or duration of a rolling reserve?
Acquirers may be willing to adjust these terms if the merchant demonstrates a consistently low chargeback ratio or provides audited financial statements showing strong liquidity. Improving internal fraud prevention measures and using 3D Secure can also provide the leverage necessary to request a reduction in the reserve percentage or a shorter retention window.
Related terms
Funds held back by the acquirer (rolling, upfront, or capped) as security against chargeback and fraud risk.
The transfer of funds from the acquirer to the merchant's bank account, net of fees and reserves.
A forced reversal of a card payment initiated by the cardholder's issuing bank.
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