The why and what of account reserves.

Aug 21 2018 | PayPal editorial staff

An account reserve is an amount of money that's put on hold in your PayPal account to help cover potential financial risk, such as payment reversals you may receive like chargebacks and claims.
PayPal uses three types of reserves: rolling reserves, minimum reserves, and jumpstart reserves
  1. A rolling reserve is a reserve where we hold a percentage of each transaction you receive each day, and then release it later on a scheduled basis. This is the most common type of reserve.
    • ​For example, your reserve could be set at 10% and held for a 90-day rolling period – meaning 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.
  2. A minimum reserve is a specific minimum amount of money we hold in your reserve balance. We either take the minimum reserve as a percentage of money held until it reaches a certain amount, or a one-time amount.
    • For example, 5% of your daily transaction volume is held until a balance of $5,000 is reached, or a one-time amount of $5,000 is taken from the available balance and deposited in the reserve balance.
  3. A jumpstart reserve is when we hold funds from your available balance immediately. 
    • For example, if we make the determination to keep a $10K jumpstart reserve and there is $20K in the PayPal account balance, we move $10K to reserves straight away.
We may also use a combination of reserve types on your account.
 
What type of reserve will my account have?
 You can view details of reserves on your account when you log into your PayPal Business account and view the balance ‘on hold’. You’ll be able to see how much money is in reserve, and when we plan to release your funds.
 
How PayPal determines a reserve.
 A reserve can be placed on your account for a number of reasons and is set on a case-by-case basis. PayPal considers a list of factors to determine this including:  
  • 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 and disputes
  • Your business and/or personal credit history
  • Whether you are selling products or services in advance (preselling orders).
  • Your delivery time frames - whether there are extended delivery timeframes
You can access the PayPal User Agreement for a full list.

When will I get my money?
It depends on the type of reserve you have. Once a reserve is placed, you’ll receive a communication 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 period of time. For example, if you have a 90 day rolling reserve, funds from Day 1 sales will be available on Day 91. We release funds at the time of the original payment. So, if a payment was received, and held, at 9am on Day 1, it will be released at 9am on Day 91.
 
Minimum reserves are reviewed within every 180 days. PayPal proactively reviews reserves and based on improvements to your business performance, we may adjust or remove the reserves.
 
How often PayPal evaluates reserves.
PayPal will periodically review your account within every 180 days to determine whether we need to adjust the reserve placement and amount. Reserves may be eligible for the reduction or removal with positive changes to key areas such as performance, industry, claims reduction, etc.
 
How to help avoid having a reserve put on your account.
 Reserves may be a necessity throughout your relationship with PayPal. Preventing reserves isn’t always possible, and depending on your industry and your credit history, you might never be able to fully remove a reserve from your account.
 
However, you can reduce the likelihood of having a reserve placed on your account by following seller best practices.

Seller best practices.

Some best practices to follow are:
  • Ship promptly and give your customers valid tracking information through PayPal, so they can keep tabs on their purchases and know when to expect delivery
  • Communicate early and often with your buyers and let them know about any changes, delays, or other important information
  • Monitor your buyer complaint rates regularly and try to keep complaint rates below 1% of your sales.
  • Avoid long refund times, which can lead to complaints from unsatisfied customers
A customer who receives prompt service, accurate order fulfillment, and speedy billing is a customer who will be less likely to file complaints or make returns in the future – and more likely to buy from you again.
 
You can also access additional information on account reserves by reviewing our FAQs at the bottom of this page.

 

The contents of this site are provided for informational purposes only. You should always obtain independent, professional accounting, financial, and legal advice before making any business decision.

Frequently asked questions.

An account reserve is an amount of money that is held in your PayPal account to cover potential risk of payment reversals you may receive, like chargebacks and claims.
Certain types of PayPal Here™ transactions have additional risk and are subject to reserves where funds are on hold in your PayPal account for a period of time. Specifically, if you have a reserve limit of $500, key-in or swipe magnetic stripe cards for sales in excess of $500 over a 7-day period, are subject to a 30-day reserve.

For example, if you process a total of $600 in keyed-in or magnetic stripe transactions over a rolling 7-day period, $100 will be held for 30-days. If funds are held in reserve, you will be notified by email and provided details on when funds will be released. The reserve limit is subject to change.

Why do you place some PayPal Here funds received via key-in & magnetic stripe in reserve?

Keyed-in and magnetic stripe transactions are associated with higher incidents of fraud compared to chip and contactless transactions. Account reserves allow for a portion of money to be temporarily set aside to cover any payment reversals associated with fraudulent activity you may receive like chargebacks, claims, and disputes.


Will using a chip card reader prevent funds from being placed in reserve?

Processing chip or contactless transactions with the PayPal Chip Card Reader can minimize the likelihood of funds being placed in reserve. There are other factors that determine when funds are held in reserve. Accounts are evaluated on a case-by-case basis and a reserve may be placed on your account if there is a high level of risk associated with your account. For more information on account reserves please visit the PayPal Help Center.

How do I know if my funds are being held in reserve?

You will be notified by email if any funds are held in reserve. Additionally, the amount being held in reserve can be found under ‘on hold’ in the money tab. From time to time, we may need to adjust your reserve amount. If that happens, we’ll email you about the changes.

How can I reduce my reserves?

If you have a PayPal Mobile Card Reader, to reduce the reserve on your account, you may consider upgrading to a more secure device. With an upgraded device, you can accept other transaction types, which are more secure, such as chip card. Alternative devices are available.

   
An account reserve is an amount of money that is held in your PayPal account to cover potential financial risk such as payment reversals you may receive like chargebacks and claims. PayPal uses three types of reserves: rolling reserves, minimum reserves and jumpstart reserves.

Reserves may be a necessity throughout your relationship with PayPal. Preventing reserves isn’t always possible, and depending on your industry and your credit history, you might never be able to fully remove a reserve from your account.

However, you can reduce the likelihood of having a reserve and improve your customer service in the process by following Seller Best Practices – and that’s a win-win for everyone.

Seller Best Practices
Some best practices to follow are:
  • Ship promptly and give your customers valid tracking information through PayPal, so they can keep tabs on their purchases and know when to expect delivery
  • Communicate early and often with your buyers and let them know about any changes, delays, or other important information
  • Monitor your buyer complaint rates regularly and try to keep complaint rates below 1% of your sales.
  • Avoid long refund times, which can lead to complaints from unsatisfied customers

PayPal proactively reviews reserves and based on improvements to your business performance it is possible that your reserves could be adjusted or removed. So, if you’ve made improvements in key areas, for example performance, industry, and claim reductions, it’s possible that your reserve will be lifted or reduced.

To find out how much money is being held or in reserve, simply click Money under the "PayPal balance" section. From time to time, we may need to adjust your reserve amount. If that happens, we’ll email you about the changes.

 
The collateral summary section represents the rolling reserves of a PayPal balance, held in reserve to cover possible disputed charges, chargeback fees, and other expenses.
 
PayPal Credit may not be offered as a funding source for every purchase. Some PayPal merchants don't accept PayPal Credit. In addition, please note that even if a merchant offers PayPal Credit as a way to pay, PayPal reserves the right to restrict your ability to use your credit line depending on the circumstances of each purchase. If PayPal Credit doesn’t appear as a payment option at checkout, you won’t be able to use your PayPal Credit account for that particular transaction.

If the merchant accepts PayPal Credit, and there are no restrictions on your transaction, we recommend that you choose from your available PayPal funding sources to complete your purchase.