Many Credit Card Processors Are Holding Money as Reserves!

Ginger HollowellCredit Card Processing/ Merchant ServicesLeave a Comment

But Not Electronic Money Company!

We reprinted Square’s explanation of reserves right from their website.  Electronic Money Company is NOT holding any of our company’s deposits in reserve!

Read below:

  • Square reserves the exclusive right to hold your money in reserve!
  • How you won’t know if Square is going to hold your money in reserve until two weeks after you sign up with them and start processing!
  • They reserve the right to withhold 5 to 50% of your deposits up to 180 days!

Quoted directly from Square’s FAQ webpage:

Why is Square holding a percentage of my funds in a “reserve?”

Reserves are a common industry practice designed to prevent a negative balance on your account. At Square, we currently apply what’s known as a “rolling reserve,” in which a percentage of your processing income is set aside in a reserve balance, and then released on a rolling basis. Your reserved funds are only used if there aren’t enough funds in your linked bank account and available Square balance to cover any disputes, refunds, or outstanding fees.

How does Square decide to apply a reserve?

Many factors are considered before we go forward with placing a rolling reserve on your account, such as:

  • New to Square. If you have a lack of processing history with us, we may place a reserve on your account until we know more about how you process payments.
  • High-risk goods or services. In review of our broad merchant base, we’ve found some businesses sell products or services that are more prone to receiving payment disputes. We may place a reserve on these businesses until we’ve established that they can maintain a low rate of payment disputes.
  • High rate of payment disputes. If a significant amount of your customers are disputing their purchases and/or if you have insufficient funds to support those disputes, we may place a reserve until your rate of disputed payments goes down.
  • Sporadic processing activity. Sudden changes in transaction sizes or how many payments you’re taking within a given period creates uncertainty around future cash flow, thus resulting in a reserve being placed on your account until a more consistent pattern is re-established.

How will I know if my account has a reserve?

If you’re new to Square:

A standard business review is conducted once you create a Square account. If we determine a reserve needs to be applied to your account, you will be notified within the first two weeks of signing up. The percentage and duration of your reserve will be reasonably determined by Square based on your processing history, but can fall anywhere between a 5 to 50% hold rate with a rolling duration of 30 to 180 days.

If you’re not new to Square:

Square accounts with a high rate of payment disputes or sporadic processing history may be subject to review at any point. If, upon review, we determine a rolling reserve needs to be applied to your account, you’ll be given notice of this change. The percentage and duration of your reserve will be reasonably determined by Square based on your processing history, but can fall anywhere between a 5 to 50% hold rate with a rolling duration of 30 to 180 days.

If you have a reserve placed on your account, you can find more information along with the current balance of your reserve by visiting the Reserve Report in your Square Dashboard.

When will I be able to access my reserve funds?

Square currently only applies what’s known as a “rolling reserve,” which is made up of two specific factors: a percentage and a duration period. The percentage represents the amount of your daily processing that will be set aside in your reserve balance. The duration is the time frame in which we set aside these funds in your reserve before releasing them. For example, if you have a 30% reserve rate with a 90-day duration, the 30% set aside in your reserve today will be released back to your available balance 91 days from now. There is no minimum requirement on your reserve balance.

How is Square using my reserve funds?

The reserve balance is there to help when there aren’t enough funds in your linked bank account or available Square balance to cover payment disputes, refunds, or unpaid subscription fees.

When will my account be reviewed?

We’ll continue to monitor your account to determine if your reserve should be modified or released. We will always notify you of any changes.

Electronic Money Company is not holding any of our merchant’s monies in reserve!

If you are considering a switch from Square, contact us at 505-296-2847.  

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