Rolling Reserve

A rolling reserve is a risk management strategy used by acquiring banks to safeguard against potential losses from chargebacks, refunds, or fraud associated with a merchant's transactions. This approach involves withholding a predetermined percentage of the gross sales revenue from each transaction processed by the merchant. The withheld funds are then placed in a non-interest-bearing account maintained by the acquirer.

The key characteristics of a rolling reserve include:

The rolling reserve is particularly common in industries considered to be high-risk, where the likelihood of chargebacks and fraudulent transactions is higher than average. Examples include travel services, telemarketing, adult entertainment, and online gaming industries.

While a rolling reserve can impact the immediate cash flow of a business, it provides acquirers with a financial cushion, reducing their exposure to potential losses. For merchants, understanding and negotiating the terms of a rolling reserve with their acquirer can be crucial in managing their financial operations effectively.