What is a reserve and why does Due have them?
Reserves are portions of payments that Due holds "in reserve."
Reserves are held to protect your business against chargebacks or disputes. We set your reserves based on the transaction history in your account as well as the information you provide in your profile, your industry, and how you’re using Due.
We have reserves to protect you from overdrafts and holding a negative balance in your Due account. As soon as your account goes negative, we start our internal collections process. If we can’t collect for any reason, there’s a chance an account could be sent to a third party collections agency. We definitely want to avoid that! To allow payment processing on Due, even if you get a chargeback or dispute, we may hold a portion of each payment in reserve. As your history grows, we can be more accurate in predicting your chargebacks based on your payments, so it's not based on averages.
How are standard reserves set?
Due has a unique reserves system that tries to balance getting the merchant's their money as soon as possible while also protecting against risky elements like fraud.
Every merchant has their own reserves threshold. This ranges from $500/week to $10,000/week, but most merchants have a threshold of $2,500/week or higher. This threshold determines the amount that can be immediately withdrawn every week. Any amount over this threshold will be available 7 days after first being received.
For example, let's say a merchant receives 3 payments of $250 each, and the merchant has a threshold of $500/week. The first two payments will be immediately available for withdrawal, but the 3rd payment will not be available until one week after that payment was first made. Any additional payments that week will also not be available until 7 days after they were made. When the next week rolls around, the first $500 collected that week will be available for withdrawal immediately, but any subsequent payments will have to wait the 7 days again.
When setting the thresholds for each merchant, we try to balance making sure that the merchant receives almost all of their average weekly payment volume immediately, while also protecting against fraud and riskier merchants.
In order to make merchants' accounting easier, we will not split up payments. If part of a payment would go over a threshold, the entire payment will be held for the standard 7 days before clearing.
How are reserves lowered or thresholds changed?
If you have a merchant that you'd like to increase the threshold for or have a merchant you believe will be doing more than $10,000/week in payment volume, please contact either your account manager (if you have one) or the Due support team by clicking the submit a request link below!