First of all, SmartTrade App merchants are great and have always had good standing, which means we will never demand a rolling reserve when you start accepting card payments through our app and dashboard. Our Payment Provider will only start taking a rolling reserve if for some reason a merchant is considered "High Risk" as explained below.

What is a Rolling Reserve?

A Rolling Reserve means a certain % of all card payments are being held back and paid out at a later date, normally 90-180 days after the payment has been accepted. This is common practice amongst card payment processors in order to ensure they are protected if a customer is considered "high risk." The % held back by card acquirers is generally between 5-15% depending on what risk level you are considered to be on.

How are you considered "High Risk?"

There is no straightforward answer to this. There are a few deciding factors when companies decide who is more risky than others. First and foremost companies will look at your dispute rate to see what % of your payments are being disputed by the customers and they'll look at the reason why the payments are being disputed (i.e. fraud vs. damaged product). They will also have a look at the volume of payments being disputed. Generally you will be considered to be of risk if 0.75% of your payments are disputed.

Why is a Rolling Reserve necessary?

This is a way for card processors to protect themselves from someone making fraudulent payments. If a merchant uses a stolen card to make a payment and the owner of the card disputes the payment, the card processor will be liable to pay the owner of the card their funds back, after which they will chase the merchant for the full amount as it was accepted illegitimately. With a rolling reserve they don't incur the risk of a fraudulent merchant running off with the funds and having to pay it themselves as there will always be sufficient funds in the merchants account to cover chargebacks.

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