Information on Merchant Accounts,
Ecommerce and Credit Card Processing

June 19th, 2007 by Jamie Estep

American Express requiring us to maintain a reserve account

Filed in: Amex / Discover | 6 comments

We just got a letter in the mail today, that American Express is requiring our business to maintain a rolling reserve on our American Express merchant account. This news came as a huge surprise since we have only had one Amex chargeback in the last two years, over thousands of Amex transactions.

As a business that uses a merchant account in addition to providing them, we like to experience everything from our customer’s points of view, but this is definitely one of those situations that nobody wants to be in. Amex makes up about 25% of our transactions, and a reserve puts a marked dent in our income.

Anyway, if you’ve had a similar situation to this with Amex or another merchant account provider please share it. I would love to see if this is an isolated event or if Amex commonly places reserves on large ecommerce businesses with clean history.

6 Responses to “American Express requiring us to maintain a reserve account”

  1. zen July 6, 2007 at 8:48 pm

    You do NOT need to accept Amex. Most people who have amex have other cards.

    In the years that we accepted amex, chargebacks from amex cardholders were far greater than all the other cards combined, and amex made it incredibly easy for the cardholder to prevail.

    In fact, we were quite literally ripped off on several occasions by amex cardholders, and there was no recourse.

    That’s also another reason we trash all amex credit offers for our own business. They simply aren’t business friendly.

    Why pay their exhorbitant fees? Visa and MC are more than ample for business, and far more reasonable.

    We discovered NO DISCERNIBLE DROP in our business when we stopped accepting amex.

    I suggest all businesses drop amex, without reservation.

  2. MICHELE August 23, 2007 at 11:28 am

    Are the fees strong? I write from Italy and here the problem is ta same.
    3.5% Vs 1.8% Visa Mastercard

  3. Alan Moses June 7, 2008 at 9:10 am

    AMEX is also holding funds in a reserve account for my business as well. We received a letter that because our business spiked so much in March, under contract they are allowed to hold funds in a reserve account. They now have over 30k sitting in a reserve account. They also say in 30 days they “might” release the funds but the funds can be held indefinitely! How is this legal? If anyone knows of something that can be done legally to have these funds released, I’d really like to know.


  4. Phil Rush January 11, 2009 at 12:17 am

    Here is an excerpt from a letter we have recently sent to the President of Global Merchant Services. We have also sent this to the specific customer service Manager screwing with our business. The second reason is that we are growing very concerned about the recent actions of the American Express Risk Management team in regards to this situation.
    We have been in discussion with the American Express Risk Management (RM) that is holding funds in a Reserve Account until this matter is closed. We received a phone call on 11/10/2008 and later a letter (see attached) dated 11/10/2008 stating this.
    What we do not understand was their basis for this hold on funds. We have never had this happen in our history with American Express. We do not have a history of successful disputes with AMEX. In fact, in all the years we have been processing AMEX cards we have only had one customer file a dispute and we won this dispute.
    First, I was told that they only hold the funds for a second dispute resolution. Upon closure of the second attempt, the funds would then be released. I understood this.
    However, there was another statement made that I found very disturbing. When I asked how soon we could see these funds released, I was told by your Risk Management representative that they might still hold these funds for the following reasons:
    1. If AMEX RM believes, they may have to respond to other disputes. I pressed this point that this concern made no business sense since we rarely take AMEX since most of our customers are large companies that pay by check or consumers use VISA/MC more often and the likelihood of future disputes was not a valid reason. Especially since we have no record of disputes. See the attached sample of our monthly bank statement and a processing statement from our Credit Card processor to see this.
    2. Then another statement was made, that again made no sense to me, that the monies were also may be held since we do not have a history of large transactions like the one in this dispute.
    Again, I questioned this statement since this dispute may be for a total of $5572.60, but was done by two separate proportional transactions over 1 week apart.
    We take issue with the statement that our history does not show large transactions with American Express. In this past year we have done over $79,000 in AMEX transactions. I am sure not earth shaking by AMEX standards, but it does contradict the unfounded statement made. You can clearly see by the attached Annual Report from AMEX and our chart we have done much larger monthly volume than this amount of $5572.60.
    I strongly believe that this representative was reading some form of script, or just blurting out standard response lines. It is obvious they have never looked at our records or history with AMEX.
    Then I asked the RM had indemnified the Card member from paying the AMEX bill while this is being sorted out since they wee holding funds in reserve. I was very surprised by the response. I was told that the Card member is still expected to pay their bill. I responded with the fact that this is known in accounting as Double-Dipping. Double dipping is defined as “DOUBLE DIPPING is two incomes received from the same source (i.e. as by holding a government job and receiving a government pension”. Or as in this case taking money from us and the Card Member for the same charges. We have been advised by our CPA that this is illegal.
    Then another surprising statement was made. I was warned, or threatened, that if there were no future AMEX transactions seen in our processing this was another reason to not release the money. We cannot be held responsible if customers do not use their American Express Cards. After this type of treatment, we have to wonder why would we take AMEX anymore?
    To add insult to injury, I have checked our Card Processors records and I find very it disturbing is that not only is AMEX RM holding funds, but AMEX also assessed their card fees as well. This is whole situation, and the way it is being handled, is unacceptable and we will be forced to refer this matter to our legal council if the entire matter is not resolved to our satisfaction.

  5. Alyson Dutch March 2, 2009 at 3:15 pm

    I recently had a client make a dispute on his AMEX card for a charge he asked us to make. He claimed to AMEX that he paid us by check for the same amount. I confronted the client saying, you know you never wrote a check, what the heck? He claimed that his ‘AMEX was stolen’ and thus the dispute was made. So, he cancelled the dispute with AMEX. For the record, AMEX told me that “disputes are disputes,” when a card is stolen, it’s a “fraud case.” So in short, my client was lying to me. Just when I thought the situation was recitifed, AMEX told me they were holding my OTHER client’s changes made via AMEX because of some “law” that allows them to do so for 30 days after a dispute. They said the “law” keeps my money in an account until they can be sure that the original card holder doesn’t file another claim…even though he called AMEX to CANCEL it. My cash flow is strangled and AMEX is holding my money. I am exceedingly angry and frustrated. As it turns out, AMEX holders can get their money back immediately and a discovery case is only opened AFTER they return the cardholder’s money. The cardholder would have to proven the same amount was paid in a check and he never sent anything to AMEX trying to prove this. Just to make sure, I sent letters from my bank to AMEX to verify that no check was received for this amount and copies of the client’s approval to charge his AMEX for our services. In this case, I am convinced the client was floating money through this transaction and my company is suffering as a result. I am a merchant who is suffering because my client did something fraudulent. It’s crazy.

    Does anyone know what this “law” is that says AMEX can hold all transactions after a dispute? This dispute was never even tried, it was cancelled.

    Would love input.

    I, for one, will never take AMEX again.

  6. michelle May 12, 2010 at 11:11 pm

    We have UNITED BANK CARD holding money that has NOT been disputed by the purchaser (customers) since February 2010 and are telling us that they wont give us our money until AUGUST 2010. No disputes, no chargeback history. Is this legal?