Let’s talk payments and rolling reserve

Merchant Account Rolling Reserves: How They Work and When Funds Are Released

A payment provider tells you that it will retain part of your card-processing funds.

You might be offered:

10% rolling reserve held for 180 days

Or your existing provider may introduce a reserve after your account has already been processing.

That can immediately create several questions:

• How much money will be withheld?
• When will each retained amount be released?
• Is the reserve a fee?
• Can the provider use it for refunds or chargebacks?
• Can the percentage increase?
• Can the reserve be negotiated?
• What happens if the merchant account closes?
• Will moving to another provider release the reserve?
• How much working capital will the business need?

A rolling reserve is not the same as an ordinary settlement delay.

With a settlement delay, the provider normally postpones payment of all eligible funds for an agreed period.

With a rolling reserve, the provider generally retains a percentage of processing while paying the remaining eligible balance according to the normal settlement timetable.

That percentage can build into a substantial sum.

For a merchant processing £1 million per month, a 10% reserve means that up to £100,000 of new processing may be retained each month before earlier reserve amounts begin to be released.

This guide explains how merchant account rolling reserves work, how to calculate their cash-flow impact and what to do if a provider introduces, increases or extends a reserve.

---

Quick answer: What is a rolling reserve?

A rolling reserve is an arrangement under which a payment provider retains an agreed percentage of a merchant’s card-processing funds.

Each retained amount is normally held for the period specified in the merchant agreement or reserve notice.

Subject to the provider’s terms and any deductions, that amount may then be released when its individual holding period ends.

A simplified example is:

Monthly card processing: £500,000
Rolling reserve: 10%
New reserve retained: £50,000
Remaining eligible processing: £450,000 before other deductions

If each amount is held for an agreed rolling period, the £50,000 retained from January may be scheduled for release separately from the £50,000 retained in February.

The reserve therefore operates as a sequence of retained amounts rather than necessarily one lump sum returned on a single date.

Providers can use different reserve structures and terminology. The precise percentage, holding period, release process and permitted deductions depend on the merchant agreement and provider’s risk decision.

---

How does a rolling reserve work?

Suppose a merchant processes:

£500,000 each month

The provider applies:

10% rolling reserve

Each month:

£50,000 is retained

and:

£450,000 remains available for ordinary settlement before fees, refunds, chargebacks and other adjustments.

The simplified reserve cycle could look like this:

Once the release cycle begins, the merchant may see:

new reserve retained

and:

older reserve released

within the same settlement period.

That does not necessarily mean the reserve balance will remain exactly the same.

It can change where:

• Processing volume increases or decreases
• Refunds or disputes use reserved funds
• The reserve percentage changes
• The provider extends the holding period
• A fixed cap applies
• Processing stops
• Currency values change
• Other permitted deductions are made

---

Find Your New Processor

MAS insight: Ask whether release is based on each transaction, each day or each settlement period

The phrase:

10% held for 180 days

does not by itself explain how the provider calculates and releases the money.

Ask whether:

• 10% of each transaction is retained
• 10% of each daily batch is retained
• 10% of each weekly or monthly settlement is retained
• Each retained amount has its own release date
• Releases happen daily, weekly or monthly
• A reserve cap applies
• Release is automatic or subject to review

A provider may calculate the reserve at transaction level but show it as a monthly balance.

Another may retain and release funds through settlement batches.

The merchant should understand both the underlying calculation and how it appears in reports.

---

Is a rolling reserve a fee?

A rolling reserve is not normally the same as an ordinary processing charge.

A processing fee is generally an amount the merchant pays for the payment service.

A reserve is money retained as financial security against potential liabilities.

However, saying:

“It is not a fee”

does not mean it has no cost to the business.

The merchant cannot use the retained money for:

• Stock
• Payroll
• Marketing
• Supplier payments
• Tax
• Refunds outside the provider account
• General working capital

The reserve therefore creates a liquidity and working-capital cost, even where the retained balance is ultimately released.

The business should separate:

processing expense

from:

restricted or retained cash

when analysing the commercial impact.

Accounting treatment can depend on the contract and circumstances, so the business should obtain advice from its accountant rather than automatically recording the reserve as either an expense or ordinary available cash.

---

MAS insight: A reserve is not automatically protection for the merchant

Providers commonly use reserves to ensure that money is available to meet liabilities such as refunds, disputes and negative balances.

That can prevent the merchant account from immediately falling into deficit when a customer claim arises.

But the reserve is primarily a risk condition imposed or controlled under the provider agreement.

The merchant should not assume that it:

• Guarantees the account will remain open
• Prevents additional funds from being held
• Covers every future chargeback
• Belongs in an instantly accessible savings pot
• Must be released on request
• Cannot be increased
• Protects the business from cash-flow problems

For example, Stripe’s current terms state that it can control a reserve, use it against applicable amounts and change the reserve terms where it believes the underlying risk has changed. Stripe says release occurs when it is satisfied that the relevant exposure has been mitigated. 

The merchant’s own agreement is therefore crucial.

---

Rolling reserve versus other types of fund retention

Several arrangements are commonly described as:

“The provider is holding our money.”

They are not necessarily the same.

Rolling reserve

A percentage of processing is retained and each retained amount is held for an agreed rolling period.

Example:

10% of each transaction held for the period set out in the agreement.

Fixed reserve

The provider requires a specific amount to remain available as security.

Example:

£100,000 fixed reserve

The provider may build this amount from settlements, request it upfront or fund it through another agreed method.

Stripe describes both fixed and rolling reserves in its current reserve guidance. 

Capped rolling reserve

A percentage is retained until the reserve reaches a maximum value.

For example:

10% retained until the reserve reaches £250,000

The provider should explain whether new amounts continue to be retained once the cap is reached and what can cause the cap to change.

Delayed settlement

All or most eligible processing is paid after an agreed delay.

For example:

T+7 settlement

This differs from retaining only a percentage while paying the balance earlier.

Fixed deposit or collateral

The provider holds a set amount against potential processing losses.

Some providers distinguish a merchant-controlled operational reserve from a provider-determined deposit. Adyen, for example, describes its reserve as an available balance used for refunds and chargebacks, while its separately calculated deposit can be withheld against payment-processing liabilities and adjusted as exposure changes. 

Transaction hold

A specific payment or group of payments is temporarily withheld.

This may follow:

• An unusually large transaction
• A customer complaint
• Suspected fraud
• Unexpected activity
• Missing fulfilment evidence

Account-level payout hold

The provider pauses some or all merchant payouts during an account review.

This is usually a wider restriction than an ordinary rolling reserve.

Negative balance recovery

Refunds, chargebacks and fees exceed the money currently available.

The provider may use future settlements, reserved funds or another contractual recovery route to cover the shortfall.

---

Why do payment providers impose rolling reserves?

The provider is considering its potential exposure if customers become entitled to refunds or raise disputes after the merchant has already received settlement.

Factors can include:

• Industry
• Future delivery
• Refund history
• Chargebacks
• Fraud
• Financial strength
• Processing growth
• Transaction values
• Subscription commitments
• Seasonality
• Customer countries
• Business age
• Previous merchant-account history
• Length of time between payment and fulfilment

Stripe’s current reserve guidance says it assesses matters including industry conditions, payment activity, dispute rates, refund rates and financial stability. It also identifies long fulfilment periods, elevated disputes and sudden unexplained increases in processing as potential reasons for applying a reserve. 

These are examples of one provider’s approach rather than a universal underwriting formula.

---

Find Your New Processor

Future delivery and reserve exposure

Future delivery is a common reason a provider may consider additional financial security.

Examples include:

• Travel booked months in advance
• Events and ticketing
• Bespoke furniture
• Kitchen and home improvements
• Pre-orders
• Annual subscriptions
• Training courses
• Memberships
• Goods manufactured to order

Consider a travel company that processes:

£1 million this month

The provider may not only consider this month’s card volume.

It may ask:

How much customer money relates to holidays that have not yet taken place?

If the merchant ceased trading, future customer disputes could exceed one month’s processing.

The provider may therefore assess:

• Unfulfilled transaction value
• Average time to travel
• Cancellation rights
• Refund exposure
• Supplier terms
• Financial accounts
• Customer-money protection
• Seasonality
• Previous disputes

The reserve should be reviewed against the provider’s actual estimate of exposure rather than treated as an automatic percentage applied to every merchant in the sector.

---

Subscription and annual billing reserves

A subscription business can also create future obligations.

Examples include:

• Annual membership paid upfront
• Software contracts paid annually
• Account credits
• Prepaid services
• Long introductory periods
• Subscription boxes paid in advance

The merchant may receive the money before delivering the full period of service.

The provider may therefore consider:

• How much service remains undelivered
• Customer cancellation rights
• Refund policy
• Renewal complaints
• Payment failure
• Financial capacity to continue delivering
• Whether the business could refund annual payments

Stripe’s credit-risk guidance specifically identifies long billing periods, including annual billing, retainers and account credits, as factors that can increase refund and dispute exposure. 

---

Find Your New Processor

High-value transactions

A business taking occasional payments of:

£10,000, £25,000 or £50,000

can create a different exposure from one processing the same monthly value through small transactions.

For example:

Merchant A

Processes £500,000 through 20,000 transactions.

Merchant B

Processes £500,000 through 20 transactions.

The same number of disputes could produce a dramatically different financial value.

A provider may therefore examine:

• Average transaction
• Maximum transaction
• Frequency of high-value payments
• Customer-present or remote channel
• Delivery evidence
• Refund policy
• Product resale value
• Previous fraud
• Financial strength

For more detail, see the MAS guide to high-value card payments.

---

A reserve can be imposed when an account first opens

The initial merchant account offer may include:

• Reserve percentage
• Holding period
• Cap
• Normal settlement schedule
• Review date
• Other security requirements

The merchant should review these terms before processing begins.

Do not focus only on:

Card rate: 0.8%

while overlooking:

10% of turnover retained

A lower processing rate may have limited value if the reserve removes the working capital needed to operate the business.

---

A reserve can also be introduced after the account is live

A merchant may process successfully for months or years and then receive a notice changing its funding terms.

Possible triggers can include:

• Rapid processing growth
• Increased refunds
• Increased disputes
• Longer fulfilment
• Financial-account concerns
• New products
• New countries
• Larger transactions
• Business-model changes
• Industry events
• Provider or financial-partner requirements

For example, Stripe’s current terms permit it to change reserve terms where it believes there has been or is likely to be a change in the underlying risk, or where a financial provider requires it. 

Another provider’s rights will depend on its own agreement.

---

What should you do after receiving a rolling-reserve notice?

Do not begin by submitting several rushed applications elsewhere.

First establish exactly what is changing.

1. Save the notice

Record:

• Date received
• Effective date
• Reserve percentage or amount
• Holding period
• Cap
• Release method
• Reason given
• Review or appeal route
• Deadline for information
• Existing reserve balance

2. Read the merchant agreement

Check the clauses covering:

• Reserve
• Settlement
• Security
• Provider reviews
• Variation of terms
• Negative balances
• Refunds
• Chargebacks
• Termination
• Final release

3. Confirm the calculation

Ask:

• Which transactions are included?
• Are refunds deducted before or after the reserve calculation?
• Are taxes or tips included?
• Are all currencies included?
• Does the reserve apply to every merchant ID?
• Does it apply to cards only or other payment methods?
• Is it calculated before or after processing fees?
• When does withholding begin?

4. Confirm the release cycle

Ask:

• How long is each retained amount held?
• When is the first release expected?
• Are releases daily, weekly or monthly?
• Are releases automatic?
• Can the provider extend the period?
• Can deductions be made before release?
• What happens if the account closes?

5. Model the cash-flow impact

Calculate:

• New money retained each month
• Expected peak reserve balance
• Date the first release should begin
• Existing available working capital
• Supplier and payroll commitments
• Refund requirements
• Seasonal changes

6. Ask what triggered the change

The provider may not disclose every detail of its risk model.

However, ask whether the main concern relates to:

• Disputes
• Refunds
• Volume
• Fulfilment
• Financial position
• Sector
• Customer geography
• New activity
• Information required

7. Supply relevant evidence

Respond to the actual concern.

8. Ask when the reserve can be reviewed

Obtain the review process and evidence requirements in writing where possible.

---

Find Your New Processor

MAS insight: Do not reply only that the reserve is unaffordable

The provider already knows that withholding money affects cash flow.

A stronger response explains:

• Why the perceived risk is lower than assumed
• What caused the account change
• What the current figures show
• What protections are in place
• What has improved
• What alternative security may be available

For example:

Refunds increased in March after one supplier failed. That supplier was replaced on 18 March, affected customers were refunded and fulfilment returned to two working days. Attached are the following three months of transaction, refund and delivery data. We would like the reserve reviewed after a further three months of stable processing.

That gives the provider evidence to assess.

---

How to calculate the cash-flow impact

Suppose the business processes:

£1 million each month

The provider applies:

10% rolling reserve

The new retained amount is:

£100,000 each month

Before the first release cycle begins, the simplified position could be:

This simplified example assumes:

• Constant volume
• No release yet
• No reserve cap
• No refunds or disputes using reserve
• No currency changes
• No change in terms

Once scheduled releases begin, the cumulative balance may stabilise, rise or fall depending on current processing and deductions.

---

The peak reserve question

Do not ask only:

How much is held each month?

Ask:

What is the maximum reserve balance we are likely to fund before releases begin?

The answer may depend on:

• Monthly turnover
• Reserve percentage
• Holding period
• Daily or monthly release cycle
• Seasonal volume
• Reserve cap
• Existing reserve balance
• Refund and chargeback use

A business may be able to manage £50,000 being retained once.

It may not be able to finance £50,000 of new retention every month for six months.

---

Monthly turnover can make the reserve look smaller than it is

A provider might describe:

10% reserve

as though only 10% of one month is affected.

But where each retained amount remains held for a longer rolling period, the total balance can represent several months of reserve deductions.

For example:

Monthly processing: £750,000
Reserve: 10%
New monthly retention: £75,000

After six similar months without releases:

Simplified cumulative reserve: £450,000

The merchant should therefore model the total funding requirement rather than treating the reserve as one 10% deduction.

---

Processing growth can increase the reserve balance quickly

Suppose processing grows from:

£250,000 per month

to:

£1 million per month

At 10%:

• Previous monthly reserve contribution: £25,000
• New monthly reserve contribution: £100,000

The percentage has not changed.

But the cash-flow impact has quadrupled.

This can also prompt the provider to reassess whether:

• The reserve cap remains sufficient
• Fulfilment can support the growth
• Refund exposure has increased
• Financial accounts support the higher volume

Rapid growth should be explained to the provider before it appears unexpectedly in payment data.

---

Seasonal businesses

A seasonal merchant may have a reserve that grows rapidly during its busiest period.

Examples include:

• Travel
• Christmas retail
• Events
• Tourism
• Outdoor leisure
• Education
• Ticketing

The business should model:

• Peak processing
• Peak reserve balance
• Quiet-season releases
• Customer fulfilment dates
• Refund periods
• Supplier payments
• Tax liabilities

A reserve based on summer processing may create cash-flow pressure long after sales have fallen.

---

What can be deducted from a rolling reserve?

The answer depends on the provider agreement.

Potential uses can include:

• Refunds
• Chargebacks
• Chargeback fees
• Negative balances
• Reversals
• Scheme liabilities
• Outstanding processing charges
• Other amounts permitted by the contract

Stripe says that when a reserved transaction is refunded or disputed, the corresponding reserve can be released and used to cover that refund or dispute. It says unused reserve funds are released at the end of the reserve period, subject to the account position. 

Adyen similarly describes reserve balances as funds available to cover refunds, chargebacks and other operational expenses where pending and next-payout balances are insufficient. 

These examples illustrate provider practice but do not replace the merchant’s own agreement.

---

Find Your New Processor

Example: Reserve release reduced by a dispute

Suppose the amount originally retained was:

£50,000

Before its scheduled release, the provider uses:

£7,000 to cover a dispute and related amount under the agreement.

The amount ultimately released may therefore be:

£43,000

rather than the original £50,000.

The settlement report should explain:

• Original reserve retained
• Date retained
• Amount used
• Reason
• Remaining balance
• Release date

Without transaction-level reporting, the merchant may simply see a lower-than-expected payout.

---

MAS insight: The original reserve amount may not return untouched

A merchant may keep a spreadsheet saying:

£50,000 due back on 1 August

But the provider’s balance may show:

• £50,000 originally retained
• £3,000 used for refunds
• £2,000 used for a dispute
• £45,000 remaining

Reserve reconciliation should include both:

retention

and:

later use or adjustment.

---

How should a reserve appear in settlement reporting?

A useful report should allow the merchant to identify:

• Processing value
• Reserve percentage
• Amount newly retained
• Reserve releases
• Refunds funded from reserve
• Disputes funded from reserve
• Other adjustments
• Current reserve balance
• Currency
• Expected future release

The merchant should be able to reconcile:

Gross transactions

↓

Refunds and adjustments

↓

Fees

↓

New reserve retained

↓

Older reserve released

↓

Net payout

For more detail, see the MAS guide to card payment settlement times.

---

Settlement example with a rolling reserve

Suppose the merchant has:

Gross sales: £100,000
Refunds: £4,000
Processing fees: £1,500
New rolling reserve: £10,000
Older reserve released: £7,000
Chargeback deduction: £2,000

The simplified payout is:

The payout differs from both:

• Gross sales
• New processing after the reserve percentage

because earlier reserve releases and other deductions are also included.

---

Can the provider increase a rolling reserve?

Potentially, where the merchant agreement permits it.

The provider may change:

• Percentage
• Fixed amount
• Cap
• Holding period
• Release timetable
• Settlement delay
• Other security requirements

Possible reasons may include:

• Higher processing volume
• Increased disputes
• Increased refunds
• Longer fulfilment
• Financial deterioration
• New products
• New countries
• Account review
• Industry conditions
• Financial-partner requirements

The merchant should ask for:

• Written notice
• Effective date
• New calculation
• Reason or risk category
• Review route
• Evidence required
• Contractual clause relied upon

Do not assume that the original reserve percentage is fixed for the lifetime of the account.

---

Can a reserve be extended?

Potentially.

A provider may review the position before the expected end of the reserve period.

Depending on its assessment, it may:

• Remove the reserve
• Reduce it
• Leave it unchanged
• Increase it
• Extend it
• Replace it with another security arrangement

Stripe’s current reserve guidance states that it reviews factors such as financial health, refunds and disputes when deciding whether a reserve should be removed, reduced, increased or extended. 

The merchant should therefore avoid treating the original end date as an unconditional promise unless the agreement clearly supports that interpretation.

---

Can a rolling reserve be negotiated?

Potentially, but never automatically.

Negotiation may take place:

• Before the account opens
• When competing offers are available
• After stable processing history
• Following a material reduction in risk
• At an agreed review date
• After improved financial information
• When the business shortens fulfilment

Possible changes could include:

• Lower percentage
• Shorter holding period
• Lower cap
• Fixed reserve instead of rolling reserve
• Delayed settlement instead of reserve
• Bank guarantee
• Parent-company guarantee
• Letter of credit
• Other agreed security

Provider terms and alternatives vary.

Stripe’s terms, for example, allow it to require other forms of credit support, including certain guarantees or letters of credit. 

That does not mean every merchant will be offered an alternative.

---

Evidence that may support a reserve review

Depending on the concern, useful information can include:

• Recent processing statements
• Chargeback data
• Refund data
• Evidence of improving trends
• Fulfilment reports
• Delivery evidence
• Financial accounts
• Management accounts
• Cash reserves
• Customer-protection arrangements
• Supplier contracts
• Insurance
• Shorter delivery periods
• Lower maximum transaction values
• Reduced customer concentration
• Regulatory or licence information
• Explanation of growth
• Updated business plan

Example: Future-delivery business

Evidence might include:

• Current unfulfilled booking value
• Delivery or travel dates
• Supplier payments already made
• Customer-protection scheme
• Cancellation profile
• Refund capacity

Example: Ecommerce merchant

Evidence might include:

• Dispatch times
• Tracking rates
• Delivery failures
• Refund rate
• Fraud controls
• Customer-support performance

Example: Subscription merchant

Evidence might include:

• Monthly versus annual billing mix
• Cancellation rate
• Refund rate
• Renewal disputes
• Remaining service obligations
• Customer-support controls

---

MAS insight: Ask what would need to improve

Rather than asking only:

Can you remove the reserve?

ask:

Which measurable conditions would support a review?

For example:

• Three months of stable processing?
• Lower dispute value?
• Shorter fulfilment?
• Updated accounts?
• Reduced maximum transaction?
• A reserve cap?
• Additional customer protection?

The provider may not commit to a particular outcome.

But obtaining the criteria can help the business decide whether a future review is realistic.

---

Find Your New Processor

Does a low chargeback rate guarantee reserve removal?

No.

Disputes are only one part of the risk assessment.

A merchant may have few historical chargebacks but still create future exposure through:

• Long fulfilment
• Rapid growth
• Annual billing
• Large prepayments
• Financial weakness
• Sector changes
• Customer concentration
• High maximum transactions
• Refund liability

Likewise, an isolated period of higher disputes does not automatically mean that no reduction is possible.

The provider may consider:

• Cause
• Value
• Trend
• Remedial action
• Financial capacity
• Wider merchant profile

Do not rely on a single universal chargeback percentage as proof that a reserve is or is not justified.

---

Should a merchant switch provider to avoid a reserve?

Potentially, but the decision needs care.

Another provider may offer:

• Lower reserve
• Shorter holding period
• No reserve
• Different settlement
• Alternative security

It may also offer:

• Higher processing cost
• Slower settlement
• Lower transaction limits
• Narrower country approval
• Longer contract
• Less suitable integration
• Its own reserve after underwriting
• Less certainty following account changes

A quotation stating:

No reserve expected

should not be treated as final unless the full application has been underwritten and the written offer confirms the terms.

---

Do not leave an existing account before the replacement is fully approved

Before switching, confirm:

• Legal entity approved
• Products approved
• Customer countries approved
• Average transaction approved
• Maximum transaction approved
• Fulfilment profile approved
• Reserve confirmed
• Settlement confirmed
• Gateway and integration ready
• Contract signed
• Account tested
• First payout understood

A salesperson saying:

We should be able to offer no reserve

is not the same as final underwriting.

The replacement account should be fully disclosed and properly configured.

For more detail, see the MAS high-risk merchant account application guide.

---

Compare providers using usable cash

Consider two offers.

Provider A

• Processing rate: 0.8%
• T+1 settlement
• 10% rolling reserve
• Reserve held under agreed rolling terms

Provider B

• Processing rate: 1.0%
• T+2 settlement
• No reserve

Provider A has the lower transaction rate and faster headline settlement.

But it retains:

£100,000 for every £1 million processed

before reserve releases begin.

Provider B charges an additional:

0.2% = £2,000 per £1 million

but may leave considerably more cash immediately available.

The meaningful comparison is:

How much usable money reaches the business bank account, when, and at what total cost?

---

MAS insight: A reserve can outweigh a pricing saving

Suppose switching reduces processing cost by:

£3,000 per month

but introduces:

£75,000 of new reserve withholding each month.

The annual fee saving could still be valuable.

But it does not solve the immediate funding requirement.

The business must compare:

• Total payment fees
• Peak reserve balance
• Settlement timing
• Cost of replacing working capital
• Refund funding
• Contract length
• Release certainty

A small card-rate saving should not be reviewed independently from cash flow.

---

Reserve versus business borrowing

Some merchants finance the working-capital gap using:

• Existing cash
• Overdraft
• Loan
• Investor funding
• Merchant cash advance
• Supplier terms

That does not make the reserve cheaper.

The business should calculate:

• Amount of capital needed
• Length of time needed
• Interest or finance cost
• Repayment effect
• Impact if reserve terms increase
• Whether releases can repay the finance

A finance product should not be taken simply because a payment provider introduced a reserve without first understanding the full commercial effect and risks.

---

What happens when processing volume falls?

If the reserve is based on a percentage of each new transaction, lower processing can reduce new retention.

However:

• Earlier reserved amounts may remain held
• Refunds and disputes can continue
• Existing release dates may remain
• Provider reviews may change the arrangement
• A minimum fixed reserve might still apply

A merchant should not assume that a lower current volume immediately releases the existing balance.

Ask whether the reserve is:

• Purely rolling
• Capped
• Fixed
• Minimum-balance based
• Subject to exposure calculations

---

Find Your New Processor

What happens when the merchant account closes?

Stopping new processing does not necessarily release the reserve immediately.

Customer liabilities can continue after the final sale.

For example:

• Customers may request refunds
• Chargebacks may arrive
• Services may remain undelivered
• Annual subscriptions may continue
• Travel may not yet have taken place
• Scheme liabilities may remain

The provider may retain reserve funds for the period permitted by the agreement or until it considers the remaining exposure resolved.

Checkout.com’s current closure guidance, for example, says that where reserves exist, they remain held for the duration specified in the merchant agreement. 

That is one provider’s policy; the merchant must check its own contract.

---

The reserve closure checklist

Before the account closes, obtain:

• Final processing date
• Current reserve balance
• Reserve by currency
• Original retention dates
• Expected release dates
• Outstanding disputes
• Potential refunds
• Negative balance
• Final settlement timetable
• Provider contact
• Reporting access
• Bank account destination
• Contractual hold period

Download:

• Transaction reports
• Reserve reports
• Settlement reports
• Refund data
• Dispute data
• Provider notices
• Merchant agreement

Keep the receiving bank account open until the final reserve release is complete where possible.

---

MAS insight: Switching provider does not transfer or release the old reserve

The new provider may begin processing new transactions.

The previous provider can still retain the historic reserve under the old agreement.

The business may temporarily have:

• Old reserve still held
• New reserve being built
• Old chargebacks continuing
• New settlement beginning
• Two reporting systems
• Two refund routes

This overlap can create a substantial cash-flow requirement.

Model it before moving.

---

Can the provider use the reserve after closure?

Potentially, where the agreement permits, to cover liabilities arising from historic processing.

These may include:

• Refunds
• Disputes
• Negative balances
• Fees
• Scheme liabilities
• Other contractual amounts

The merchant should ask for a final reconciliation showing:

• Opening reserve
• Amounts used
• Amounts released
• Amount remaining
• Expected next action

Do not accept only a final bank payment without obtaining the report explaining how it was calculated.

---

What if the reserve is not released when expected?

Start with the written terms and provider records.

1. Confirm the original release date

Check:

• Reserve notice
• Contract
• Dashboard
• Settlement report
• Provider correspondence

2. Ask whether the reserve has been extended

Request written confirmation of:

• New date
• Reason
• Contractual basis
• Amount affected
• Evidence required
• Review route

3. Reconcile deductions

Check whether:

• Refunds
• Disputes
• Fees
• Negative balance

have reduced the amount.

4. Use the provider complaint process

Submit a clear chronology containing:

• Merchant ID
• Reserve amount
• Expected release
• Actual release
• Relevant documents
• Outcome requested

5. Consider professional advice

Where a substantial sum is disputed or the merchant’s financial position is at risk, legal, accounting or insolvency advice may be appropriate.

Merchant Advice Service cannot compel a provider to release funds.

---

Fixed reserve versus rolling reserve

A fixed reserve may provide more certainty about the maximum amount withheld.

For example:

Fixed reserve: £200,000

Once funded, ordinary processing may no longer create new reserve deductions unless:

• The fixed requirement changes
• The balance is used
• The agreement requires replenishment

A rolling reserve changes with processing.

For example:

10% of each transaction

The most suitable structure depends on:

• Processing volume
• Seasonality
• Financial position
• Exposure
• Provider terms
• Ability to fund upfront security

A fixed reserve is not automatically better.

Funding £200,000 immediately may be harder than building the same amount gradually.

---

Capped reserve versus uncapped reserve

A capped reserve gives the merchant an expected maximum under the stated terms.

For example:

10% rolling reserve capped at £300,000

Ask:

• Does withholding stop at £300,000?
• Is the cap reviewed automatically?
• Can the provider increase it?
• What happens if reserve money is used?
• Must the merchant replenish it?
• Does the cap apply per merchant ID or company?
• Does each currency have a separate cap?

An uncapped percentage can create a continuously growing balance where processing increases faster than releases.

---

Find Your New Processor

Multi-currency reserves

An international merchant may have reserve balances in:

• GBP
• EUR
• USD
• Other settlement currencies

Ask:

• Is reserve retained in the original transaction currency?
• Is it converted?
• Which FX rate applies?
• Are releases made in the same currency?
• Can one currency cover a negative balance in another?
• Is there one overall cap or separate caps?
• How are FX movements shown?

A reserve described as:

£250,000 equivalent

may change in practical value if the underlying funds are held in several currencies.

---

Marketplace and platform reserves

Platforms can face more than one type of reserve.

There may be:

• Reserve imposed on the platform
• Reserve held against connected sellers
• Seller-level rolling reserve
• Platform-funded negative-balance reserve
• Payout delay
• Reserve covering refunds and chargebacks

The platform should establish:

• Who carries dispute liability
• Which account funds the reserve
• Whether seller payouts are reduced
• Whether the platform can pass reserve terms to sellers
• How negative balances are recovered
• How reserve releases are reported
• What happens when a seller closes

Stripe’s Connect documentation, for example, describes platform reserves used when connected-account balances become negative. 

Marketplace reserves need to be reviewed alongside seller payout, onboarding and contractual responsibilities.

For more information, see the MAS guide to marketplace payment gateways.

---

Applying for an account with a reserve

Before accepting an offer, ask for the reserve terms in writing.

Percentage or amount

• What percentage is retained?
• Is there a fixed amount?
• Is there a cap?

Calculation

• Which transactions are included?
• Before or after refunds?
• Before or after fees?
• How are currencies handled?

Holding period

• How long is each amount held?
• What starts the clock?
• Are days calendar or working days?

Release

• Daily, weekly or monthly?
• Automatic or reviewed?
• Can releases be postponed?
• How will they appear in reporting?

Use

• What can be deducted?
• Can reserve fund refunds?
• Can it fund disputes?
• Must it be replenished?

Review

• When can it be reviewed?
• What evidence is needed?
• Can the percentage or period increase?

Closure

• How long can it remain after termination?
• What happens to future disputes?
• Which reports remain available?

---

The rolling reserve offer checklist

Before signing, confirm:

• Reserve percentage
• Fixed or rolling structure
• Cap
• Holding period
• First expected release
• Release frequency
• Normal settlement timetable
• Refund treatment
• Chargeback treatment
• Negative-balance treatment
• Currency treatment
• Review date
• Provider variation rights
• Security alternatives
• Account-closure terms
• Final release process
• Reporting

Do not rely only on a salesperson’s summary.

The merchant agreement and final underwriting offer should reflect the agreed terms.

---

Has a provider introduced or increased a rolling reserve?

Tell Merchant Advice Service:

• Current provider
• Business activity
• Monthly processing value
• Average transaction
• Maximum transaction
• Reserve percentage
• Holding period
• Reserve cap
• Current reserve balance
• Settlement timetable
• Refund profile
• Dispute profile
• Fulfilment period
• Customer countries
• What the provider’s notice says
• What you want to improve

MAS can help you:

• Understand the commercial effect
• Identify information another provider may request
• Compare potential merchant-account arrangements
• Review settlement and reserve structures together
• Prepare a clearer application for alternative providers

Merchant Advice Service cannot:

• Force an existing provider to remove a reserve
• Release held funds
• Alter the provider’s contract
• Guarantee another provider will offer no reserve
• Guarantee an account application

Final underwriting, reserve, settlement and security terms remain with the relevant payment provider.

Sources and product references

• Stripe — Reserves: frequently asked questions
  Stripe guidance explaining fixed and rolling reserves, risk factors, use of reserved funds and the reserve-review process.
• Stripe Services Agreement — Services Terms
  Stripe’s contractual provisions covering the creation, funding, use, variation and release of reserves.
• Stripe — Viewing reserve status and details
  Guidance on checking reserve balances, releases, refunds and disputes through the Stripe Dashboard.
• Stripe — Credit account review process
  Stripe guidance on risk factors including disputes, refunds, long fulfilment periods, annual billing and rapid increases in processing volume.
• PayPal UK — What are reserves?
  PayPal’s explanation of rolling reserves and other account-reserve structures.
• PayPal UK — Why payments may be held or unavailable
  Provider-specific guidance on rolling reserves, scheduled releases and factors that can affect fund availability.
• Adyen — Merchant account reserves
  Adyen documentation explaining how reserve balances can be used for refunds, chargebacks and operational expenses.
• Adyen — Merchant account balances and deposits
  Guidance distinguishing pending balances, payouts, reserves and provider-determined deposits.
• Checkout.com — Updating fixed and rolling reserves
  Checkout.com guidance on fixed and rolling reserve conditions set out in a merchant service agreement.
• Checkout.com — Closing a merchant account
  Provider-specific guidance on reserve holding periods after account termination.

---

Find Your New Processor

About Merchant Advice Service

Merchant Advice Service provides free, independent guidance to businesses looking for help with card payments, payment gateways and more complex payment requirements.

Where appropriate, MAS may introduce a business to a relevant payment provider. We may receive a referral fee or commission if an introduction results in a completed account or service.

MAS does not necessarily compare every provider in the market, and all applications remain subject to the relevant provider’s own assessment, underwriting and approval.

This article provides general payments information and does not constitute legal, regulatory, financial, accounting or insolvency advice. Reserve percentages, holding periods, releases, deductions and security terms vary between providers and merchant agreements.