Hopefully you have never been presented with the situation of your business needing a reserve account for your credit card processing. Delta Airlines has just been threatened with a reserve account for their credit card processing that could cost their business over $750 million dollars in just 2 months.
A reserve account is basically a savings account that some merchants are required to have in the event of excessive chargebacks, a high risk business type, poor credit history, or some other factor that could jeopardize the businesses ability to pay their credit card processing bill.
There are 2 types of reserve accounts, rolling and fixed. A fixed reserve will require a business to maintain a certain monetary amount of money in the reserve account at all times. A rolling account will keep a certain percentage of the funds the businesses processes for a set period of time and then the funds will be released into the merchants bank account. Some rolling reserves span for only a few days while others are for months or even years.
A reserve account is designed to protect the processing bank in the event that the merchant can’t pay for the processing bill that they accumulated. If the merchant cant pay, then the processing company is stuck with the bill. This includes merchant account fees, chargebacks, merchandise returns, or any other fee the is any way connected to the accepting of credit cards.