Let’s talk payments and rolling reserve

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Libby James
Merchant Services Expert

Libby James is co-founder, director and an expert in all things merchant services. Libby is the go-to specialist for business with more complex requirements or businesses that are struggling to find a provider that will accept them. Libby is regularly cited in trade, national and international media.

What is rolling reserve?

We often get asked by merchants for the to define what a rolling reserve is. As with most industry terminology this topic can, understandably, cause confusion to business owners worldwide.

So what is the meaning of a rolling reserve? Some merchant account providers request a rolling reserve, which is a facility to counterbalance the risk of loss to the merchant and the acquiring bank in the event of high chargebacks. The reserve itself is a percentage of monthly transaction turnover, which can be anything up to 10%. This money is held for a set period of time by the account provider, and subsequently released accordingly.

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Rolling reserve calculations

Accounts withrolling reserveswill be assessed on a case by case basis, the reserve itself tends to be between 5% and 10% of the merchants monthly turnover, with pay outs from three to twelve months. Once the account is live and the agreed pay out period has passed, future payments will be made on a monthly basis in arrears.

Some start-up merchants prefer accounts with no rolling reserve as, in the first few months of trading at least, every penny counts. Rolling reserve merchant accounts tend to be used for high risk merchants working in industries with historic chargebacks.

Rolling reserve merchant accounts

There are some common misconceptions when it comes to payment processing with a rolling reserve, which merchants need to be made aware of.

Firstly and most importantly many businesses see a rolling reserve as a negative element which is factored in when choosing certain account providers. The tool should be seen as a safety net, for you the merchant, rather than a loss in turnover in the early months of opening your account. The rolling reserve itself isn’t a fee, more a delay in payment therefore you will receive the transaction payments after a delayed period.

We often get asked for ways around having a rolling reserve, it’s important to consider why you don’t want the protection in place for your business. If you are working in a high risk industry with large chargebacks and didn’t have a rolling reserve in place, you could receive funds which then need to be paid back (or deducted from your next settlement.) Having said that if you are using an account such as PayPal or Stripe and wish to find alternatives with lower rolling reserve amounts, then it might be worth shopping around. Newer businesses often use the above companies and stick with them as their companies grow, however with well-run accounts it may be possible to reduce your rolling reserve by switching account providers.

Remember, the account rolling reserve will not earn the provider any interest, and is there to protect them as much as it does you. It shouldn’t be seen as a fee which you cannot afford, more as protection and receiving pay-out on goods or services which have completed formally with no issues along the way.

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Libby James

Libby James Co-founded Merchant Advice Service alongside David Bird in 2016. Her finance background, coupled with retail and customer service experience, gave Libby the drive to bring transparency and non-biased advice to the world of merchant services. Having come from the heavily regulated mortgage and insurance industry, Libby found it puzzling that other financial sectors lacked regulation and transparency leaving customers confused and unable to make informed decisions when it came to accepting card payments. This was soon to become Libby’s obsession!

With the help of some of the industry’s best, Libby began to research acquiring banks, complex terminology/regulation, and the problems customers experience within merchant services and payment gateway markets. She spent years on sourcing solutions for complex clients, which previously others were unable to assist with. Libby established relationships with brokers and banks which would soon form the cornerstone of Merchant Advice Service. As a result Libby has been featured in high-profile publications across the web.

Libby is proud to be the entrepreneur’s champion, supporting start-up businesses regularly. Her industry insights can often be found on LinkedIn where she provides free of charge advice and money saving pointers. It’s safe to say she has her finger on the pulse of everything card payments related.

Libby speaks of her experience in founding and running Merchant Advice Service…

‘Merchant Advice Service is one of my greatest achievements to date. We help business owners to overcome card processing issues which can become detrimental to their business. We assist SME’s in finding suitable card payments solutions, helping them create their vision. Each and every day is different, exciting and fore filling. As technology advances I can’t wait to see the way in which the merchant services market advances, and I’m pleased that our business will play a part in educating company owners along the way.’

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