Category Archives: Personal Finance

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What Is An Upfront Reserve?

Before considering a merchant’s application, an acquiring bank or a payment processor requests them to put an upfront reserve—an amount your processing bank can use to recover from the monetary issues that might emerge later.

This reserve is used against the exposure to financial risks, such as an increased number of chargeback requests. Reserves are not just for the protection of the acquiring banks, but they are equally important for the merchant’s safety. Read on to learn more about the upfront reserves, why they are required, how much reserve is needed to create a merchant account, and who needs it.

What is an Upfront Reserve?

Working with a high-risk merchant carries significant risk for the payment processor. There can be many legal issues that can shut the business down for good. Reserve accounts refer to the place where a portion of the merchant’s income is held temporarily to cover possible chargebacks, refunds, and other claims.

If a customer issues a chargeback against a transaction and their request is approved, the merchant has to refund the amount. The acquiring bank uses this reserve to clear the refunds and chargebacks. In most cases, payment processors request a rolling reserve only, but if it’s a high-risk merchant, they might request an upfront reserve as well.

An upfront reserve, as the name suggests, is the amount that a payment processor holds in the merchant’s reserve account before they start operation. It has nothing to do with the merchant’s income or weekly sales. It’s rather a fixed amount that the merchant has to deposit into their reserve account for safety purposes. The upfront reserve amount can vary greatly depending on the merchant’s processing volume for the month, but it’s usually between 50 and 100 percent of their monthly processing volume. For example, if you are allowed to process transactions worth $200,000 a month, your upfront reserve balance must be between $100,000 and $200,000.

Different Types of Reserve

Different Types of Reserve

As mentioned above, the reserve is used to cover chargebacks, financial obligations, refunds, and other issues that might emerge from credit card transactions. The main purpose of this reserve is to mitigate the financial risks of the payment processor. Let’s take a look at the different types of reserves.

  • Upfront Reserve: It is the amount stored in the merchant’s reserve account before they start processing credit card transactions. The upfront reserve is calculated based on the merchant’s risk profile, the industry they operate, the chargeback ratio, and other factors.
  • Rolling Reserves: In addition to the upfront reserve, the payment processor can keep a specific percentage of the amount from the merchant’s daily or weekly income and hold it for a short period. The amount is then transferred to the merchant’s account, usually within 30-180 days. The rolling reserve doesn’t have a fixed percentage. It varies depending on the merchant’s sales volume and their income. Usually, it is 10% of your sales volume.
  • Capped Reserve: The capped reserve refers to the total amount the payment processor can hold in the merchant’s account. Once this threshold is reached, the acquiring bank can no longer put money in the reserve.

How Does It Work?

The payment processor collects a specific amount of money and puts it in the merchant’s reserve account to recover from the financial losses if the merchant’s account is terminated in the future. Although this amount acts as financial security, it is still the merchant’s money. If your account activity doesn’t indicate any trouble or you have not incurred any chargeback or any financial loss in the past few months, the upfront reserve will be given back to you.

Not just for safety purposes, but the upfront reserve can be used to increase your processing volume over time. For instance, if you are currently approved for a monthly processing volume of $150,000, you can raise it to $200,000 by putting an extra $50,000 into your reserve account.

How is the Reserve Collected?

The upfront reserve is deposited either immediately or in installments based on the merchant’s risk profile. In most cases, the merchant submits a fixed dollar amount to the processing bank. The amount is decided based on the merchant’s sales volume. There’s also an alternative method, in which the merchant doesn’t deposit the upfront reserve immediately, but their income from the sales is held in this account until the minimum reserve is met.

For example, if you are approved for a $100,000 monthly processing volume, but started accepting credit card transactions without putting any money in the reserve account, your earnings from the sale will be deposited into the reserve account until you have $100,000 in it. As soon as the minimum reserve balance threshold is met, your income from the sales will start to be deposited into your bank account. This kind of reserve is for businesses that do not have any processing history or do not have enough capital to save money in the reserve account before starting a business.

So, where does this reserve amount stay? Well, it’s stored in the non-interest-bearing bank. Your payment processor collects and saves this amount in the reserve. Since it’s linked to your merchant account, you can view the balance in your reserve account on your statement any time you want.

How is Upfront Reserve Different from Other Reserve Types?

The upfront reserve is not requested from every merchant. It’s only required from the high-risk merchant, who’s doing business in an industry that’s associated with legal issues. Capped and rolling reserves are more flexible in that they allow you to put money in the reserve account over time instead of depositing a huge amount at once.

In an upfront reserve, you need to save the funds before starting a business. The biggest advantage of the upfront reserve is that it’s only for a brief period and you will start making money once you have met the reserve balance. No matter the type of reserve, you can rest assured that the entire reserve amount will be credited to your bank account within a few months.

Why Should You Have an Upfront Reserve?

Upfront reserves are not very common in the credit card processing industry. If you are requested to deposit an upfront reserve, you are either accepted for a high monthly processing volume, you have a history of excessive chargeback requests, or you are in a high-risk industry.

If the processing bank believes you can pose a financial threat to their bank or might incur a significant financial loss, they will ask you to deposit an upfront reserve to be approved for the merchant account with them. Alternatively, the processing bank might ask you to deposit the money in your reserve account as you earn from sales. As mentioned previously, the entire amount from your sales will go into the reserve account until the reserve requirements are met.

This leads us to an important question, how can you get the upfront reserve amount back?

Your upfront reserve amount will be transferred to your bank account once you have built a successful and healthy processing history. The reserve is stored to prevent financial liability for the payment processor. If you do not receive any chargeback, refund, or any financial obligations that require reservations, the processing bank will most likely give it back in some time.

However, the amount is not released immediately. It’s rather released in stages, even if you deposited the full amount in the reserve immediately. For instance, the processing bank could release 20% of your reserve initially and every month until the full amount is released and your reserve account is emptied. You can also ask the payment processor to release your reserve.

Where is the Reserve Used?

If you are declared insolvent and you have to shut down your business, the payment processor will use the reserve amount to repay your chargebacks and refunds, and meet other financial liabilities. In 180 days, whatever amount remains in the reserve (after clearing the chargeback and other financial liabilities), will be transferred back to the merchant. Of course, you can check with your payment processor and request an early reserve release, if your merchant allows that.

Industries that offer future delivery services are more likely to receive the upfront reserve request. Examples include concert tickets, airline services, etc. That’s because these services have delivery dates, which are 3-6 months into the future. There’s a chance the buyer may reserve the services and then change their mind in the future. There’s also a high risk of chargeback or refund requests.


For any business dealing with high-ticket transactions, there is an increased risk of chargeback and financial issues. As a result, the payment processor might require an upfront reserve, which is held in your reserve account for a short while, around 180 days until the amount is returned to your account. Upfront reserves are not for every business, and there’s a good chance a merchant won’t be requested to make this fixed deposit. It’s just for high-risk merchants.

Cheapest Shipping Rates

How To Get The Cheapest Shipping Rates In 2023?

Shipping costs remain crucial as they are capable of affecting whether or not a customer will purchase your product. It is important to conduct in-depth research before you make any exorbitant decision in the effect of ongoing inflation -particularly if you are a small-scale business framing the shipping approach for the first-ever time.

A recent report estimated that around 50 percent of online customers abandon the respective cart due to additional costs like expensive shipping and taxes. Customers usually expect instant and affordable delivery options at the time of checkout. Therefore, maintaining reduced shipping rates will be undeniably beneficial for your organization. How can you ensure that you always have the lowest shipping rates?

Cheapest Method to Ship Depending on the Size of the Package

The overall shipping costs are significantly influenced by the size of the package getting shipped. The larger will be your package, the more room it will take up in the vehicle. Eventually, it will result into expensive shipping.

As large packages tend to be carried by forklift, your brand’s packaging should be capable of handling bulky loads while understanding the difficult carrying methods required by the respective packages. It is recommended to always utilize well-designed, new boxes -preferably featuring staples or seamed.

Additionally, large-sized packages are much more like to move at the time of shipping. Conventional packaging materials like bubble wrap and scrunched-up paper might not be sufficient in stopping the overall damage. Rather, you can think of leveraging enclosures made out of corrugated boards or engineered foam. However, these packaging techniques can also sometimes increase the overall shipping costs. Alternatively, you can make the shipping costs quite manageable when you choose the option of flat-rate shipping.

Most leading shipping companies like DHL and FedEx will go ahead with satisfying your requirements -irrespective of the size of the package. The least expensive option for transporting small packages is the USPS or United States Postal Service. On the other hand, FedEx and UPS, offer some of the most affordable shipping rates even for large-sized packages. Both carriers allow you to use the standard shipping services to transport oversized packages that weigh up to 150 pounds.

Moreover, in most cases, you might not require a second box as most products are already available as packaged. In the respective situations, you should ensure that products feature accurate labels. This can feature multiple notices that are required depending on what is inside and the right shipping labels. Barcodes should be readable to be scanned effectively. Therefore, they must be shielded from damage or harm.

Cheapest Method to Ship Depending on Weight

The price of shipping a package is also determined with the help of DIM (dimensional) weight. The height, width, and length of the package tend to be multiplied -followed by dividing the same with the DIM variable of the carrier for determining the weight of the package.

DIM weight can increase the shipping costs if you are sending the oversized package. For instance, if the package will weigh 10 lbs but the DIM weight is 15 lbs, you will be billed for the DIM weight of 15 lbs.

If the DIM weight of the parcel tends to be lower than the original weight, the cost of shipping will be determined by the original weight. Some of the DIM factors are utilized by leading companies like FedEx, USPS, and UPS for calculating the weight of the large-sized packages.

The weight that can be carried by a majority of shipping agencies is also capped. For instance, USPS is not able to transport packages that weigh more than 70 lbs. UPS and FedEx services feature the most cost-effective rates for packages that weigh over 10 lbs. FedEx Ground and UPS services feature the most affordable rates for packages that weigh over 10 pounds. The service offers guaranteed same-day delivery within 1-5 days. It is amongst the cheapest ways for ensuring domestic shipping across the United States.

Cheapest Method to Ship Depending on Delivery Speed

One of the cheapest shipping options for bulky boxes is the notion of ground shipping. However, it will take time to ship the packages. Ground shipping typically requires 3-5 working days after pickup for delivering the package. Therefore, if you require access to speedy delivery, you will leverage air freight. Eventually, it will significantly increase the overall costs for transporting heavy items.

Most consumers would want the respective orders delivered instantly. Therefore, it is important to take the shipping speed of the carrier into account. For 2-3 day of shipping, USPS serves to be one of the most affordable options. Even after having comparable delivery times to USPS, FedEx and UPS charge more for shipping. However, one major benefit of using the two services over USPS is that they always offer delivery guarantees.

Moreover, FedEx and UPS also serve as the best options for ensuring next-day delivery. The option of next-day delivery by UPS offers the guarantee of nighttime delivery between 3-4pm. The service provider also offers same-day shipment to residential complexes. Moreover, for sites within the distance of 150 miles, FedEx offers the promise of next-day shipment by the time of 4:30pm.

For deliveries that are time-sensitive, UPS also offers the assurance of delivery in the morning. It offers the guarantee of shipment by 8 am across all metropolitan areas and before 9 am to a wide number of cities. Moreover, some locations can also receive access to shipments on Saturdays. On the other hand, FedEx offers access to assured overnight delivery services that start at 8 am the next subsequent day.

What is the Cheapest Method to Ship Packages Internationally?

International shipment is regarded as the shipment of goods across nations by sea, air, or road. Cross-border transportation of freight is quite complicated that involves the process of adhering to a wide range of rules & regulations. Companies are expected to know as well as follow stringent international inspections to ship goods without any issues. They are also expected to gather paperwork for the respective cargo for getting customs clearance.

In addition to other factors, the shipment mode has a major impact on the speed with which the shipments will cross the border. The transportation mode you will select has a major impact on the duration within which the delivery will take place. For instance, air freight moves at a rapid rate in comparison to sea freight. However, the overall speed will come at a specific cost. On the other hand, sea tends to be less expensive but slower mode of transportation. If you will ship fragile items that cannot be secured properly over longer distances, sea freight is not a suitable option.

On the other hand, if you are dealing with smaller packages, USPS serves to be a great option for international shipping. It turns out to be one of the most affordable ways to small-sized parcels that weigh around 4 lbs to more than 180 nations. However, you should know that the brand does not offer access to the delivery ETA. Ultimately, final shipment can take some time. There is no provision of insurance coverage. However, you can buy insurance on your own.

FedEx serves to be another leading brand for international shipping. The services they offer for ensuring international orders will allow you to deliver to more than 200 nations across the world -including the United States of America, Canada, Europe, and so more. The delivery time tends to be 2-3 working days -depending on the type of shipment.


While leading companies like FedEx, UPS, and USPS have their own benefits and drawbacks, you should decide on your own the best solution for your company with respect to both services and prices.

You should select the respective shipping partner depending on the nature of the business, objectives, vision, and the preferences of the customers. In simpler terms, choosing the most affordable option should not minimize customer retention or drive away repeat customers.

Therefore, one of the best ways of deciding the best solution is by gaining in-depth understanding of your business, what the company stands for, and what the clients want out of your business. Search for a partner you can trust effectively. Inspect the labels that are applied correctly and advance to the carrier, carrier selection methods, and warehousing units to ensure that you are shipping goods in the most cost-effective manner while minimizing the risks of return.