Understanding High Risk Reserve Requirements

While normal merchant account applicants fulfill usual (flexible) conditions and pay set transaction fees, high-risk merchant account holders are charged higher setup fees and need to meet reserve requirements too! 

The reserve amount belongs to the high risk merchant and is held in bond by the acquiring bank in order to make up for any sudden chargebacks. Yes, chargebacks are very real in high risk markets. 

How Are Reserve Requirements Established?

The true total reserve amounts and how the reserve is set up will depend upon the level of risk associated with different businesses, and differ from bank to bank. 

Generally, reserves are a definite percentage of a business’s monthly charge volume, decided after withholding some percentage of every transaction. 

These reserve amounts are held on bond by acquiring banks to compensate abrupt chargebacks and belong to merchants. Despite the fact that most merchants regard these reserve requirements as unnecessary and negative formalities, they often prove to be highly helpful for high risk businesses that are prone to higher chargebacks.