Processors of merchant accounts concerned with the prospect of being left holding the bag when businesses go under are holding back a portion of receipts from certain customers as a means to fund a reserve to cover refunds and charge-backs. The problem is that changes in policy that could affect merchant account holders in this way are not always made clear enough in advance, leaving some customers facing unexpected cash-flow problems. Processing agreements for merchant accounts often allow for the processor to hold a certain amount in a rolling reserve, which may be as high as 20 percent to cover possible refunds and charge-backs; the funds are typically released back to the merchant after one to two months as a portion of current receipts are rolled into the reserve.

But, if merchants are unexpectedly caught with an account that suddenly has a lower balance than expected, it can result in severe disruption to business operations. This could ironically cause the very problem that the rolling reserve was intended to protect against in a kind of self-fulfilling prophecy. In a worst case scenario, even for a large, well established business with low margins, an unexpected loss of as much as 20 percent from an account could possibly trigger a bankruptcy. In some cases, the reserve could be triggered by a sudden increase in credit card receipts, curtailing the availability of funds even as a business is growing fastest. It is therefore very important to understand what the current policy is for your merchant accounts, and if the conditions of the agreements appear to be formulated in a way that could result in the automatic creation of a rolling reserve. It would be much better for you to find better terms for your merchant account before the fact if you find that you need to than to be faced suddenly with a lack of funds without immediately understanding why.

Other Interesting Posts
1. Take the Steps to Protect Yourself-Find Divorce Records...
   You really have no way of knowing what you are getting yourself into when you take the vows "for better or worse." But if someone has been...
    
   
2. Search Online First For The Best Auto Loan Deal
   by John Brennan As the credit market is in complete chaos all new car buyers are beginning to stress about being approved for a loan. A new...