Reserve impact calculator

How a rolling reserve actually works

A rolling reserve withholds a set percentage of your settlements and gives each slice back a set number of months later. The mechanics are worth being precise about, because the way it feels is not the way it is usually described.

In the first month, the reserve costs you the monthly withholding and nothing comes back. In the second month, the same. Nothing is released until the first slice reaches the end of its hold period. So the balance climbs in a straight line for the whole hold period, and only then flattens out. Once it flattens, you are in steady state: each month's release roughly matches each month's withholding, and the balance sits at its peak for as long as the reserve runs.

That peak is the number that matters, and it is the number that gets left out of the conversation. A 25% reserve is described as taking a quarter of your money. It does not. It takes a quarter of six months of your money, all at once, and holds it.

The hold period is the number nobody negotiates

Both inputs multiply, so they have exactly equal power over the result. A 10% reserve held for twelve months holds $180,000 of a $150,000-a-month business — exactly the same as a 20% reserve held for six. A 5% reserve held for twelve months holds more than a 20% reserve held for three. Read the table: if you negotiate the percentage and sign the hold period unread, you have negotiated half the number.

Illustrative, on $150,000 a month in card volume. Your own figures go in the calculator above.

Why reserves exist, honestly

It would be easy to write this page as though reserves were a trick. They are not. A card payment can be disputed long after it settles, and when a dispute lands on a business that no longer exists, the acquiring bank pays it. A reserve is the acquirer's protection against that exposure, and reserves exist in some form across the acquiring market. That is why this is a category mechanic rather than a complaint about any one provider.

What varies is not whether reserves exist. It is how the decision to impose one gets made, how much warning you get, and whether there is anyone you can talk to about it. Those are the parts that are actually a choice.

A reserve, a hold and a termination are three different things

• A reserve withholds a slice of each settlement and releases it on a schedule. The rest of your money pays out normally. Your cash flow takes the hit; your business keeps running.
• A payout hold or freeze stops the money moving while a review runs. There is usually no schedule attached, which is what makes it worse than a reserve even when the dollar amount is smaller.
• A termination closes the account. It can come with a listing on MATCH, Mastercard's Member Alert to Control High Risk Merchants, which other acquirers check at underwriting and which is retained for five years. It is not a legal bar on taking cards — acquirers do board listed merchants with justification — but it makes the next merchant account much harder to get, and it is best dealt with directly rather than worked around. No rate you negotiated matters against it.

People tend to shop for a rate and inherit the other three without asking. A quarter of a point on $150,000 a month is about $375 a month, or $4,500 a year, and you can work out your own figure with the effective rate calculator. Now set that against a reserve on the same volume. A 25% reserve held for six months holds $225,000 of your capital, and at a 12% cost of capital the carry on that balance is about $27,000 a year for as long as the reserve runs. The reserve is not a fee and you do get the capital back. It is still the larger number. Illustrative, on the figures above.

What to ask before you sign

1. Is there a reserve on this account, and if not, what would trigger one? Get the answer in writing. "We do not normally" is not an answer.
2. Rolling or capped? A capped reserve stops growing once it reaches a set amount. A rolling one does not, so it scales with your growth. Growing fast on a rolling reserve means the amount held grows with you.
3. What is the hold period, and what is the release schedule? This is the number that doubles your exposure, and the one most likely to be in a schedule you did not read.
4. Who decides, and can I speak to them? If the answer is a risk model and a ticket queue, you know what the process will look like on the morning you need it to go differently.
5. How much notice do I get? Finding out from your bank balance is the common experience. It should not be.

Where Flux actually stands on this

We are not going to tell you that Flux will never hold funds. We have acquirer and card network obligations, and there are situations where we have to ask for documents or hold money. Any provider who promises otherwise is promising you something they do not control.

What we can tell you is how it works here. Flux gives each merchant their own merchant account and a human underwriting review, rather than underwriting thousands of businesses into one shared book where risk has to be automated because nobody's job can be to know your account. So when something looks unusual, the question comes from a person who has seen your volume before. Where we have the choice, you get a question before you get an action, you hear it early and in plain language, and you can get that person on the phone.

That is a claim about process, not about outcomes, and it is the only kind of claim on this subject that is honest.

This page is the arithmetic. For the mechanic behind it — why a reserve attaches to some businesses and not others, how a reserve differs from a payout hold, and the four things a reserve clause should state — read the reserves and payout holds hub.