Get to know PayPal account reserves

Sep 10 2019 | PayPal editorial staff | 4 min read

An account reserve is an amount of money put on hold in your PayPal account to help cover potential financial risk, such as payment reversals you may receive through chargebacks and claims.
At PayPal, we use 3 types of reserves: rolling reserves, minimum reserves and jumpstart reserves.
  • A rolling reserve is one where we hold a percentage of each transaction you receive and release it later, on a scheduled basis. This is the most common type of reserve. For example, if your reserve is set at 10% and held for a 90-day rolling period, 10% of the money you receive on day 1 is held and then released on day 91, 10% of the money you receive on day 2 is held until day 92, etc.
  • A minimum reserve is a specific minimum amount of money we hold in your reserve balance. We build the minimum reserve by collecting a percentage of your incoming transactions until a specific amount has been reached.
  • A jumpstart reserve is a set minimum amount of money held in your reserve balance. It is taken immediately from the funds in your account’s available balance. For example, if we make the determination to keep a $10,000 jumpstart reserve and there’s $20,000 in your PayPal account balance, we’ll move $10,000 to your reserve balance straight away. If there aren’t enough funds in your available balance, we may ask you to top up your PayPal account to facilitate the jumpstart reserve.
We may also use a combination of reserve types on your account.

What type of reserve does my account have?

You can view details of reserves on your account when you log in to your PayPal business account and view the ‘on hold’ balance. You’ll be able to how much money is in reserve and when we plan to release your funds.

How does PayPal determine a reserve is necessary?

A reserve can be placed on your account for a number of reasons and is set on a case-by-case basis. We consider many factors to determine this, including:
  • Your business and/or personal credit health
  • Your processing history with PayPal and other providers
  • Whether your industry has a higher likelihood of chargebacks or refunds
  • Whether your account has an elevated number of customer claims, chargebacks, refunds or disputes
  • Whether you’re selling products of services in advance (pre-selling)
  • Whether your delivery timeframes are longer than expected
See the PayPal User Agreement for more information.

When will I get my money?

That depends on the type of reserve you have. Once a reserve is placed, you’ll receive an email outlining the terms of your reserve, and you can also find the terms in your account.

If you have a rolling reserve, we’ll release funds after a certain time. For example, if you have a 7 day rolling reserve, you’ll have access to funds placed in reserve from day 1 on day 8.

Reserves are reviewed from time to time and yours may be adjusted or removed based on improvements to your business performance. If a reserve isn’t reduced or removed, it will be held in your ‘on hold’ balance until after you cease trading with us, and then will be released to you in line with the terms of our User Agreement.

How often does PayPal evaluate reserves?

We review all reserves from time to time to determine if we need to adjust their placement and amount. Reserves may be reduced or removed when we see positive changes to key areas such as business performance, industry, claims reduction, etc.

How can I prevent having a reserve on my account?

Preventing reserves isn’t always possible and, depending on your industry and other factors, you may never be able to fully remove a reserve from your account.

However, you can reduce the likelihood of having a reserve placed by following seller best practices. Some best practices to follow are:
  • Ship promptly and share tracking information with your customers through PayPal so they can keep tabs on their purchases and know when to expect delivery.
  • Communicate early and often with your customers, and let them know about any changes, delays or other important information.
  • Monitor your buyer complaint rates and try to keep them to a minimum.
  • Avoid long refund times which can lead to complaints from unsatisfied customers.
  • When requested, provide up-to-date financial statements and information related to the credit health of your business
A customer who receives prompt services, accurate order fulfilment and speedy billing is a customer who is less likely to file complaints or make returns in the future, and more likely to buy from you again.

The contents of this site are provided for informational purposes only. The information in this article does not constitute legal, financial, IT, business or investment advice of any kind and is not a substitute for any professional advice. You should always obtain independent, professional accounting, financial, IT and legal advice before making any business decision.

Frequently asked questions.

Here are some common reasons why a payment may be temporarily unavailable:

  • You’re a new seller with PayPal, or you’re an established seller but have opened a new account. It takes time to build up enough history of successful transactions.
  • You haven’t sold in a while. Previously inactive accounts may be subject to payment holds while rebuilding a positive selling history.
  • You receive a large number of reversals, disputes, or chargebacks. We suggest that you communicate with your customers often and work with them to resolve any concerns. If your customer filed a dispute or chargeback because someone illegally used their PayPal account to make the transaction, please hold off on shipping any items.
  • Your selling pattern has changed. For example, the sales volume increases abnormally, or there’s a change in your average selling price, business platform, or type of item being sold.
  • The transaction involves higher-risk items, including tickets, gift cards, consumer electronics, computers, and travel packages.

For tax holds, check PayPal tax holds for US taxpayers

By placing the payments on hold, we want to make sure that there are enough funds in your PayPal account to resolve any issues that may arise with your transactions, such as chargebacks or disputes.

If there aren’t any issues with your transaction or account, the payment will typically be available to you within 21 days after receipt (the funds may not be released until later in the day). To get your payments released sooner, use trackable delivery with any of our approved delivery companies and enter the tracking details on your Activities page. We’ll usually release your payment 1 day after delivery is confirmed. 

Where is the money I received?
How to spot fraudulent emails?

If fundraisers accept payments independent of their reward based campaign for the future delivery of a product or service it is considered Preselling.  

When fundraisers engage in preselling, PayPal may hold the money to help ensure that buyers receive the product or service they paid for within the agreed timeline or a get a refund if the product isn’t available.  

Occasionally, businesses that presell items run into unexpected problems that leave them unable to deliver what was promised and can even put them out of business. This puts PayPal in a tough spot when something goes wrong, our highest priority is protecting our customers and creating a positive experience for all users. We want fundraisers to get paid and we want the customer to get what they ordered. If fundraisers can’t deliver, we need to enable the customer receive a refund.

Examples of Preselling associated with crowdfunding are:
  • During an active campaign, fundraisers are also accepting pre-orders for the campaign product or service on their website.
  • After a campaign has closed, fundraisers are accepting pre-orders for the product or service on their website.
Once the campaign has been launched, we will continue to monitor your account to ensure it remains compliant with our policy and government regulations. Accounts with heightened risk may require us to take action such as imposing a payment hold or reserve. Sometimes this review takes time and in rare situations, an account may immediately be put on hold until the review can be completed. 

Some heightened risks include:
  • High likelihood of negative customer experiences from chargebacks, refunds, or fraud.
  • Non-compliance with our Anti-Money Laundering Policy.
  • Negative publicity about a campaign causing donors to ask for their money back.
  • Accepting payments unrelated to the campaign for a high risk business through the same account.
Under the terms of the “Restricted Activities and Holds” section of the User Agreement, we can limit your ability to pay or send money while your account has a negative balance.

If a buyer files a claim, chargeback or reversal against you, we’ll place a temporary hold on the funds in your PayPal account. This’s done to ensure that you’re aware of this and there are sufficient funds available to cover the full amount of the claim, chargeback or reversal.

To resolve the case, you need to submit the necessary documents required in the Resolution Centre. We’ll also need the following documents from you as proof of shipment:

  • For an unauthorised transaction, proof of shipment is required.
  • For items not received, proof of shipment or proof of delivery is required.
We'll review and determine whether the transaction meets the eligibility requirements for Seller Protection. If it does, we will lift the temporary hold on the funds and restore the funds to your account. Otherwise, the funds will be returned to the buyer’s account. A fee may apply in a chargeback case.

Learn more about Seller Protection in Australia.
The contents of this site are provided for informational purposes only. The information in this article does not constitute legal, financial, IT, business or investment advice of any kind and is not a substitute for any professional advice. You should always obtain independent, professional accounting, financial, IT and legal advice before making any business decision.