Rolling reserves

If a merchant can't cover its obligations, such as chargebacks from dissatisfied customers, refunds on undelivered goods, or fraud. Reserves are the main tool that Braintree uses to manage this exposure. By holding some of a merchant's processed volume in reserve, Braintree creates a financial buffer that can absorb losses without disrupting settlement operations, so cash flow remains predictable and transparent for the merchant.

The type of reserve that Braintree requires for a merchant depends on Braintree's risk team's assessment of the merchant's level of risk exposure, which considers factors such as the merchant's risk profile, business model, and processing history. For example, industries that have a longer gap between payment and delivery, such as travel and subscription services, carry higher chargeback risk and are more likely to require a reserve as a result.

This guide helps merchants understand the different types of reserves that Braintree uses.

Reserve types

The following table describes the reserve types that Braintree uses.

Rolling and risk reserves serve different functions:

• Rolling reserves are a type of collateral. Braintree bases the amount of a rolling reserve on a merchant's overall risk profile. Rolling reserves function as a buffer that offsets the risk that is associated with the merchant's business model and processing history. Braintree doesn't use rolling reserve balances to cover day-to-day operational losses.
• Risk reserves, also known as risk holds or capped reserves, are operational holds that Braintree applies in response to specific events, such as a carding attack or a sudden spike in chargebacks. Braintree manages these reserves separately from rolling reserves, and a risk reserve can withhold as much as the full disbursement if required.

Common features of reserves

A few behaviors apply across both rolling and capped reserves.

• Reserves use calendar days, not business days. Holding periods are measured in calendar days, consistent with PayPal's reserve policies. A 30-day hold means exactly 30 calendar days from the date Braintree withheld the funds, regardless of weekends or holidays.
• Configuration changes apply only to funds that Braintree withholds after the effective date. When reserve parameters change, funds that are already in reserve continue to follow the terms under which Braintree originally held them. To make a change to the reserve configuration, create a new configuration that has a future effective date.
• Only one future configuration can exist at a time. To change a pending future configuration, delete it first, then create a new one. You can't edit or delete the currently active configuration. A new future configuration can only follow it.
• Reserves operate independently from risk holds. Braintree tracks rolling and capped reserve funds separately from risk holds and collections. Even if a merchant account is in a risk-hold status, reserve releases still proceed on schedule. Braintree applies the released amount to the reserve balance instead of disbursing it directly while a risk hold is active.

Rolling reserves

A rolling reserve holds a fixed percentage of a merchant's gross daily sales for a set number of calendar days. When the holding period for a given day's funds expires, Braintree automatically releases those funds in the next disbursement.

Key parameters

• Reserve percentage: The portion of gross daily sales that Braintree withholds. This typically ranges from 1–20% with a default of 5%.
• Holding period: The number of calendar days that Braintree holds funds before releasing them. Options are 30, 60 (default), 90, or 120 days.

Example

Each day, Braintree withholds the configured percentage from gross sales and adds it to a holding queue. When the holding period for a given day's funds expires, Braintree releases that amount as part of that day's disbursement.

The following example shows a 5% reserve with a 60-day holding period.

After the initial holding period passes, each disbursement includes both a daily hold and a daily release, stabilizing the cash flow.

Risk reserves

With a risk (or capped) reserve, Braintree stops collecting when the total reserve balance reaches a specified cap amount. If the balance later falls below the cap, collection resumes automatically. For example, if chargebacks reduce the balance below the cap, collection resumes until the balance reaches the cap again.

Key parameters

The following key parameters control risk reserves.

• Reserve percentage: The portion of gross daily sales that Braintree withholds while the balance is below the cap.
• Cap amount: The maximum dollar amount that Braintree holds in reserve. Braintree stops withholding funds when the balance reaches this amount.

Example

Each day, Braintree checks whether the current reserve balance is below the cap. If it is, Braintree withholds the configured percentage from gross sales or the amount needed to reach the cap, whichever is smaller. When the cap is reached, Braintree makes no further deductions until the balance drops.

The following example shows a 5% reserve with a $5,000 cap.

Opting out of a reserve requirement

To opt out of a reserve requirement, set the percentage and holding period to 0 (zero) with a future effective date. After that date, Braintree withholds no new funds. Funds that are already held continue to release on their original scheduled dates, so the reserve balance gradually decreases to 0 (zero) as the remaining holds reach their release dates.

Key terms

The following table defines key terms about reserves.