Reserve Account

Simple definition
A special account where banks keep some of a merchant's money for security reasons.
Expanded definition
An account maintained by the acquiring bank to hold funds as security against potential future liabilities, chargebacks, or disputes.


In the payments ecosystem, risks loom around every swipe and tap. Reserve accounts provide merchants with a fund buffer to cover problems when transactions go awry. Understanding why reserves are required and how they work enables businesses to navigate the complexities of commerce confidently.

What are Reserve Accounts?

Reserve accounts are contingency funds merchants must keep on deposit with their payment processor. A percentage of sales proceeds are held in these accounts to cover potential issues like:

  • Reversals due to chargebacks
  • Refunds for returned merchandise
  • Fines for excessive chargebacks
  • Customer disputes and complaints
  • Processing errors

Reserves provide a financial safety net when disruptions strike.

Navigating Reserve Requirements

Merchants should:

  • Carefully review processor reserve policies before signing contracts.
  • Maintain sufficient balances to avoid dips into mandatory reserves.
  • Improve operations to reduce incidents requiring reserves.
  • Request reductions as chargeback rates decline over time.
  • Develop reserve funding plans when launching higher-risk products.

With vigilance, reserves allow commerce to thrive safely.

The Bottom Line

Reserve accounts inject transactions with fail-safes that minimize exposure for merchants and processors. Though requiring upfront collateral, they enable businesses to absorb problems that will inevitably arise with customers.