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Account Reserves

Key Facts

  • An account reserve is a pool of money set aside in your PayPal account to act as a cushion in the event of payment issues.
  • A rolling reserve holds a percentage of the money you take in each day and then releases it on a scheduled basis.
  • A minimum reserve is a specific amount of money that you’re required to have available in your PayPal account at all times, taken either up front or established on a rolling basis.
  • Account reserves may be placed if you operate in a high-risk industry or if you have elevated numbers of payment issues (chargebacks, claims, disputes, etc.).
  • In some cases, reserves are unavoidable for certain industries or higher-risk credit attributes.

What are reserves?

A reserve is an amount of money that is held in your PayPal account that is used when we are unable to collect on your past due balances from: chargebacks, claims, debit transactions with insufficient funds in the account, and fees. PayPal uses 2 types of reserves: rolling reserves and minimum reserves.

A rolling reserve is a reserve where a percentage of transaction(s) 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, and another 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 in your reserve balance at all times. The minimum reserve is either taken as an upfront amount deposited all at once or a percentage of money is held until a certain amount has been reached.

For example, 5% of daily transactions are 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.

An account can have both a minimum and a rolling reserve at the same time.

Why does PayPal have reserves?

Reserves are a common industry practice and are used to minimize losses and to create a safer shopping experience. If you would go out of business or would be otherwise incapable of covering your financial obligations, we would still need to pay back the buyer. If a buyer contacts PayPal or their financial institution because they didn’t receive what they ordered, we’re responsible for making things right.

Why was a reserve placed on my account, and how can I remove it?

Account reserves are placed and evaluated on a case-by-case basis. A reserve may be placed on your account if there is a high level of risk associated with your account. In making a decision about reserves, we may consider:

  • How long you’ve been in business.
  • Whether your industry has a higher likelihood of chargebacks, refunds, or fraud.
  • Whether your account has had a higher than average number of customer disputes, claims, chargebacks, bank reversals, or refunds.
  • Whether you’re selling products or services in advance (preselling orders).
  • Your processing history with PayPal and other providers.
  • Your business and/or personal credit history.
  • Your delivery time frames - whether there are extended delivery timeframes.
  • If there have been significant changes in your business such as: large increase in daily or monthly sales, increase in your average sale price, increase in your dispute, claim, chargeback, or refund rates.

If your account has a reserve, PayPal will re-evaluate your account periodically to determine whether the reserve should be changed. Preventing reserves isn’t always possible, and depending on your industry, credit history and other factors, you might never be able to fully remove a reserve from your account.

An account is eligible for a review once every 180 days based on the following criteria:

  • Minimum of 3 consecutive months of improvement in the areas that were identified as risk issues and
  • No other new risk issues and
  • Dispute, claim, chargeback, and refund rates are at established acceptable levels.

How do I prevent reserves from being placed on my account?

Preventing reserves isn’t always possible, and depending on your industry, credit history, and other factors, 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 these Seller Best Practices.

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 and try to keep complaint rates below 1% of your sales.
  • When possible, don’t accept the payment until you can ship the merchandise or provide your services.

A customer who receives good service and gets what they ordered when they expected it will be less likely to file complaints or make returns in the future – and more likely to buy from you again.