Squarespace Payments Risk Reserves Explained
TL;DR:
- Reserves are funds temporarily held by Squarespace to cover potential business losses
- Three types exist: fixed, rolling, and one-time reserves
- They protect against refunds, chargebacks, and customer disputes
- Funds get released when conditions are met or the reserve period ends
- Good customer service and clear policies help reduce reserve requirements
Payment reserves might sound scary, but they're actually a standard part of online payment processing. Think of them as a financial safety net that protects both you and Squarespace when things go sideways with transactions.
What Are Payment Reserves?
Reserves work like a temporary holding account. Squarespace sets aside a portion of your earnings to cover potential problems like customer refunds or disputed charges. If a customer challenges a payment or demands their money back, these reserved funds handle the refund instead of pulling money from your main account balance.
This system keeps your cash flow more predictable. Instead of sudden hits to your available funds when disputes arise, the reserved money covers these costs.
Types of Reserves
Fixed Reserve
A set percentage of each transaction gets held until a specific release date. For example, 10% of every sale might be reserved for 90 days.
Rolling Reserve
Similar to fixed reserves, but funds are released on a rolling schedule. As each transaction reaches a certain age (like 30 or 60 days), its reserved portion gets released back to you.
One-time Reserve
A lump sum gets moved into reserve and held until an expiration date. This often happens when Squarespace identifies specific risks in your business.
Why Reserves Happen
Several factors can trigger reserves on your account:
- Long delivery times or extended billing cycles
- High numbers of unfulfilled orders
- Frequent customer complaints or refund requests
- Sudden spikes in sales volume
- History of payment disputes or chargebacks
These situations increase the likelihood of future payment problems, so reserves help manage that risk.
Reducing Reserve Requirements
You can't always avoid reserves, but smart business practices help minimise them:
Monitor Your Disputes
Check the Finance panel regularly for any customer disputes. Address them quickly before they escalate to chargebacks.
Clear Communication
Make your shipping times, return policies, and product descriptions crystal clear. Most disputes stem from unmet customer expectations.
Keep Good Records
Document everything: transaction details, shipping confirmations, customer communications, and delivery receipts. This evidence helps resolve disputes in your favour.
Responsive Customer Service
Reply to customer concerns promptly. Solving problems directly with customers prevents them from going to their bank to dispute charges.
Managing Reserve Notifications
When Squarespace places a reserve on your account, you'll receive an email explaining the terms and duration. This notification includes:
- The reserve amount or percentage
- How long funds will be held
- Conditions for release
- The reason for the reserve
Keep these emails for your records and mark release dates on your calendar so you know when to expect funds back.
FAQs
What triggers a reserve on my account?
High-risk activities like increased disputes, many unfulfilled orders, or sudden sales spikes can trigger reserves. Squarespace uses these as early warning signs of potential payment problems.
Can I access reserved funds early?
Generally no. Reserved funds stay locked until the specified conditions are met, like the end of the reserve period or resolution of outstanding disputes.
How do I know if a reserve is placed?
You'll receive an email notification with all the details about the reserve terms, amount, and release conditions.
Do reserves affect my ability to process new payments?
No, reserves don't stop you from accepting new payments. They only hold back a portion of your earnings.
Jargon Buster
Chargeback: When a customer disputes a charge with their bank, and the bank reverses the payment. This is different from a regular refund because it bypasses you entirely.
Dispute: A customer's formal challenge of a transaction that requires investigation and possible refund.
Rolling basis: A continuous cycle where funds are held and released according to the age of each transaction, rather than all at once.
Wrap-up
Reserves are a normal part of payment processing, not a punishment. They protect your business from sudden financial hits when payment disputes arise. Focus on excellent customer service, clear policies, and good record-keeping to keep reserves minimal.
Stay on top of your Finance panel notifications and respond quickly to any customer concerns. The better you manage customer relationships, the less likely you'll need significant reserves.
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