Understanding High Risk Merchant Account Reserves

Nov 04, 2013

A Reserve is just a fancy way of saying, “You are new to the game of merchant accounts and we will have a backup plan.” It’s not something fancy, just precautionary. As you are new, they just want to make certain that if you have a chargeback or refund, that money is there in case you default with the customer.

The reason being, a merchant account servicer is held responsible by the cardholder bank. If your business is not capable of returning a customer’s money, the amount in the reserve is used to pay that customer back.

A regular reserve

A high risk merchant account will generally have 10-20% placed into a reserve on a daily basis. As a new customer, you will be placed on a three to six-month trial period. Some as long as one year and when the trial is done, the money that is sitting in the reserve account will be returned to you in full.

Knowing this as you go in

Since you now know what is waiting for you, you can be prepared as you open your new high risk merchant account. You can budget for the shortfall, and as you near the end of the trial period, you will have a windfall deposited into your account. It’s a weird way of looking at a savings account for down the road that you can’t touch.

Rolling reserve

Sometimes they do things differently and will roll the reserve. In other words, from month to month, it will be a little different. As the last month goes by, the money from that month will be given back to you and this month will be in the process of being collected.

That way, you aren’t out too much money and it also says that you aren’t as high a risk as some accounts. It also says that they aren’t as worried about your account activity as they are about others. That is a good sign for you and your business.

How can you tell

You will find out the amount when you open your merchant account. The amount is usually calculated by the numbers that you and your agent work out. Be as accurate as possible and they will be as fair as possible.

After all, they are in the business of staying in business too. An honest merchant account servicer will not want to cheat you. They want you to stay in business as well.

Read the bottom line

Before you sign the dotted line with any merchant account servicer, feel comfortable with the terms of the transactions. If at all you don’t feel like you are getting the best deal and things aren’t quite right, they likely aren’t. Trust your instincts and check things out before you lose your income to fraud.

If they are who they say they are, they will protect you, not steal from you. So, good luck with your dreams and here’s hoping your business soars.


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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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