There are times where underwriting prefers a reserve on a new merchant account. As much as we typically are able to avoid this scenario, here’s how that would occur and the reasons behind it.
First, your bank statements may show an amount insufficient to cover any chargebacks or refunds. When this occurs, the provider and bank that signed you up holds the responsibility with these customers that are looking for their money back.
Second, the level of risk with the business plays a role as well. When a business model is known to have chargebacks, underwriting will feel comfortable putting a reserve on the merchant account – typically around 5-10%.
The good news? You’re at full control. If the reserve is something you are looking to avoid, but underwriting feels comfortable with, there’s still hope. Show the risk department that you have a solid refund policy in place. A time-span of 3-6 months with clean processing (minimal chargebacks) is another way to get rid of the reserve down the road.
We treat every account with a customized solution. This helps us take an issue like a reserve and treat it with the best solution possible given the circumstance. Do you have any questions on how merchant account reserves work? Go ahead and ask below and we’ll answer to help you out.