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What are reserves?

An account reserve is a percentage of money that is held in your PayPal account to cover any payment reversals you may receive like chargebacks, claims, and disputes. PayPal uses 2 types of reserves: rolling reserves and minimum reserves.
  • A Rolling reserve is a reserve where a percentage of each transaction you receive each day is held and then released later on a scheduled basis. 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. Rolling reserves are the most common type of reserve.
  • A Minimum reserve is a specific minimum amount of money that you’re required to keep available in your PayPal account balance at all times. The minimum reserve is either taken as an upfront amount deposited all at once or is established on a rolling basis from percentages of sales, much like a rolling reserve. An account can have both a minimum and a rolling reserve at the same time.
Why PayPal uses reserves

Reserves are used to prevent transaction losses that may occur from payment reversals like chargebacks and disputes filed by your buyers. Ordinarily, if you have a reserve on your account and receive a chargeback or dispute, we will deduct that amount from your available balance and not from any reserve balance. However, if a seller goes out of business or stops processing payments through PayPal, we will use any reserve to satisfy future payment reversals.

Reasons for placing reserves

Account reserves are placed and evaluated on a case-by-case basis. PayPal may place a reserve on your account if we believe there is a high level of risk associated with your account. In determining that a high level of risk is present, PayPal considers a list of factors and how they change over time, including (but not limited to):
  • How long you’ve been in business.
  • Whether your industry or the transaction type has a higher likelihood of chargebacks and disputes.
  • Your payment processing volume and history, spikes or reductions, with PayPal and other providers.
  • Your business and/or personal credit history.
  • Your delivery time frames.
  • Whether you have higher-than-average numbers of returns, chargebacks, claims, and disputes.
  • Manually-keyed transactions from PayPal Here

Once your account has a reserve, PayPal will re-evaluate your processing attributes from time to time to determine whether the reserve can be removed or whether the amount of money kept in the reserve needs to be increased or decreased. 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.

How to prevent reserves from being placed on an account

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
  • 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.
  • Avoid long refund times, which can lead to complaints from unsatisfied customers.
  • Review your orders for fraud.
  • Be aware of common scams.
  • Monitor your buyer complaint rates regularly.
  • When possible, don’t accept the payment until you can ship the merchandise or provide your services.
  • For PayPal Here, swipe credit and debit cards when the card is physically available. Only manually key the card number when necessary and appropriate.
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.
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