Reserve Account

One method that ACH Processor's use to mitigate risk, is to require that merchants maintain a Reserve Account at the Processor's Sponsoring Bank. This allows the Processor to issue a Hold on funds in this account when fraud has been detected or an excessively large number of returns is received. Merchants with good credit and history can usually meet the expectations of ACH Processors for covering returns and so are not always required to keep a reserve account. In cases where a reserve is required, the minimum-reserve-balance in the account is set at about 20% of the anticipated processing volume. New merchants are usually allowed to build up their reserve by sending in transactions which are not withdrawn until the minimum reserve balance is achieved; after that, the merchant is allowed to withdraw the excess funds for transfer to their home town bank.