Payment Withholdings from Square Could be Disastrous for Some Small Businesses

Many businesses that have an online merchant account from Square have become aware of a recent development involving “holding” funds from their merchants–sometimes for as long as 120 days.

What is Square’s “Rolling Reserve?”

According to widely published news reports, the payment processor Square has been withholding funds from some of the merchants that use its services for their credit card transactions. These withholdings are what Square is calling a “rolling reserve,” according to Square’s own website, where it clarified what these practices are designed to accomplish.

It claims that this money, which can be as much as 30% of the merchant’s collected transactions, will be delivered to the merchant gradually over a period of up to 120 days.

Why is Square doing this? According to the company, this is to protect Square from online merchant accounts that they consider to be high-risk for chargebacks. In other words, if a business is high-risk for transaction disputes, Square wants to make sure they have a percentage of the eCommerce credit card transactions in reserve for insurance.

Here’s why this is problematic and is making many small businesses angry.

How this could affect you

The businesses that are deemed “risky sellers” by Square include those that simply offer options for pre-payments on their services or products, which Square claims makes it statistically more likely that customers will dispute the subscription charges or refund their pre-payments on their eCommerce credit card.

People are discovering, however, that Square’s practices are allegedly not limited to risky sellers. In addition, their standard for what makes an online merchant account a “risk” is considered by some merchants to be too broad. Some small businesses are finding as around a third of their transactions being withheld without much explanation at all.

It’s gotten so bad that a petition from Square merchants to curb these practices (or at least provide more consistent notices of which businesses will be affected) has been circulating, garnering thousands of signatures.

What can your business do?

If you use a merchant account from Square then, unfortunately, there is nothing you can do to ensure that Square will not withhold your funds. The only solution to be certain you will avoid this outcome is to obtain a new merchant account from another merchant account provider.

The Takeaway

Square’s policy of withholding funds from its merchants has left small businesses scrambling at a time when many of them are already struggling to remain open. Accordingly, it may be worthwhile for some business owners to consider obtaining a new merchant account from a different provider.

For more information or to obtain a new merchant account, visit or call (888) 924-2743.

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