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How to Maintain a Low Reserve Rate

As a merchant using 2Checkout as your online payment processor, you may have noticed that a percentage of your total sales is held in your account at all times. This amount is called a Reserve and corresponds to a set percentage of sales (5% of each payment on rolling base) that has been designated to stay in your 2Checkout merchant account on a rolling 90-day basis.

How Are Reserve Rates Determined?

Reserve rates are set in proportion to the level of risk of each merchant. While risk can never be entirely eliminated, it can be managed. Vendors who take an active role in preventing fraudulent claims often receive a lower reserve rate as a result.

Managing risk can be inherently more difficult in some industries. For example, intangible goods are much riskier than tangible goods from a fraud perspective, simply due to their nature. It’s much easier to prove that a tangible good was shipped to a customer than to prove that a service was provided or an intangible good was delivered; intangible goods merchants receive many more fraudulent claims because of this reality.

Why Do Reserve Levels Rise?

Reserve levels can be raised for several reasons: sudden increases in chargebacks or refunds are the leading cause of raised reserve levels. If your reserve level has been raised, the change isn’t necessarily permanent. Our team continuously reviews accounts to ensure each merchant receives an appropriate reserve level and risk assessment. Additionally, merchants may request that their reserve levels be revisited if they’ve updated their business practices.

Keep Your Reserve Level Low

We want our merchants to have access to the largest portion of their funds possible at all times. Here are a few tips to keep your reserve rate as low as possible:

Prevent Chargebacks

Chargebacks are the biggest reason why reserve levels are increased. Try to keep your chargeback rate under .5%. You can achieve this by:

  • Keeping an eye out for users who are subscribed to your services but haven’t utilized them in two or more billing cycles. Discontinued use could be an indicator that a buyer has forgotten about his or her purchase, which could result in a chargeback.
  • Reviewing your sales frequently for consistency and fraud identification. Look at the number of purchases, volume of purchases over a set time period, credit cards used, address verification system (AVS), card verification value (CVV), and buyer information like name, email address, billing and shipping addresses, and IP address to identify inconsistencies that may point to fraud.
  • Making sure your website is complete and accurate. Describe the product(s) customers will receive, delivery processes, and expected delivery time frame in great detail to avoid surprises. Also, be sure that your refund and privacy policies are conspicuously displayed on your website and up-to-date. If you have the appropriate resources, it’s best to display product information in your customers’ preferred language(s) to prevent surprises and subsequent chargebacks.
  • Be proactive with customer issues. This includes all of the following:
    • Make sure your contact information is up to date and allows customers to easily initiate communications through multiple channels (phone, live chat, email, etc).
    • Promptly respond to all inquiries.
    • Provide tracking information for tangible goods.
    • Remove or clearly identify any backordered products on your website.
    • Cancel duplicate transactions immediately upon discovery.
    • Cancel orders that were not fulfilled or were requested to be cancelled.
    • Offer partial refunds to unhappy customers.
  • When it comes to chargeback prevention, reviewing your orders for fraudulent activity or unhappy customers applies to both new sales and existing sales. Review your older sales to see if there are suspicious transactions or upset buyers with orders that require a partial or full refund in order to avoid chargebacks.

Prevent Fraud

Fraudulent orders go hand in hand with chargebacks. Take an active role in mitigating your risk of fraud by following these guidelines:

  • Review your orders to make sure information is legitimate. For instance, make sure phone numbers are valid and that they match the states and/or countries listed on the billing information. Also review the IP location to ensure it matches the billing address for each order.
  • If you see that information does not match or is not valid, verify the order via phone to ensure its authenticity. If you are not able to do this, please cancel the order or contact 2Checkout for assistance with your fraud review.
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