Contents
- Why Are My Funds Being Held? A Small Business Owner’s Guide to Merchant Account Holds and Reserves
- Summary
- The Top Reasons for Fund Holds and Deposit Reversals
- 1. Bank Filters or Blocks
- 2. Chargebacks
- 3. TIN (Taxpayer Identification Number) Mismatch
- Understanding Merchant Account Reserves
- Types of Merchant Account Reserves
- Who Needs a Reserve?
- What Small Businesses Should Do Next
- Frequently Asked Questions (FAQs)
- About IntelliPay
- Disclaimer
Why Are My Funds Being Held? A Small Business Owner’s Guide to Merchant Account Holds and Reserves
Summary
Few things frustrate small business owners more than seeing their hard-earned money suddenly held, reserved, or missing from their bank account. Payment processors and banks use fund holds and merchant account reserves to protect against risk, fraud, and regulatory issues—but understanding the reasons, knowing what you can do, and recognizing how to prevent future holds can make this stressful experience much more manageable. This guide combines the latest expertise and practical advice, designed for small businesses in 2025.
The Top Reasons for Fund Holds and Deposit Reversals
1. Bank Filters or Blocks
Many regional banks and credit unions, as well as large national banks, use filters to prevent fraud when new business accounts are opened. If your processor tries to debit fees but hits these filters, you might get an “ACH Reject,” and funds will be held until the issue is resolved. Fees can apply each time a reject occurs.
What you can do:
Contact your bank to remove or adjust filters.
Add your payment processor’s ACH Originator ID or Company ID to the approved list.
If using specialty accounts (DACA/Escrow), ensure a separate debit account is set up for fees and refunds.
2. Chargebacks
A sudden spike or unusual volume of chargebacks makes processors nervous—that money could disappear due to disputes. They may hold deposits temporarily to review and cover possible losses.
What you can do:
Accept or dispute chargebacks (with documented evidence).
Prepare a chargeback mitigation plan to reassure your processor.
Implement strong refund and communication policies to reduce future disputes.
3. TIN (Taxpayer Identification Number) Mismatch
If your merchant account name doesn’t match the IRS records for your business’s TIN, the IRS and your state can force backup withholding, removing up to 24% federally and 4% at the state level.
What you can do:
Correct mismatches immediately with your processor.
Contact support and your relationship manager for instructions.
File amended returns with the IRS if necessary, and reconcile accounts monthly.
Understanding Merchant Account Reserves
Sometimes your processor holds money not because of a transaction issue, but to protect itself from potential losses due to chargebacks, returns, or unpaid fees. Reserves are a form of escrow created based on your risk profile—but not all merchants must keep a reserve.
Types of Merchant Account Reserves
Upfront Reserve: New businesses with no track record may provide an initial lump sum or allow all revenue to be withheld until the reserve is met.
Accrual Reserve: A percentage of daily/weekly sales is held back until a set reserve amount is reached.
Rolling Reserve: A common model where a percentage of monthly sales is held for a set number of months, with funds released in sequence (e.g., 10% of monthly sales held for six months).
Who Needs a Reserve?
Mostly high-risk businesses:
High sales volume with long lag times (e.g., travel, subscriptions)
Businesses with poor credit history
High-risk industries (cannabis, adult products, emerging tech)
Businesses with recurring billing and high chargeback/return rates
Tip:
Provide thorough, accurate info on your merchant application, and keep business records organized.
What Small Businesses Should Do Next
Communicate with your processor and bank—often, holds can be resolved quickly with documentation and direct contact.
Audit your account monthly to catch unusual activity or withholding early.
Prepare for holds by maintaining backup cash flow and understanding account terms.
Consult experts if you’re unsure about the reason for a reserve or how to release held funds.
IntelliPay’s payment experts are ready to help, and reaching out early can save time and stress.
Frequently Asked Questions (FAQs)
Why did my bank hold my deposits?
Likely due to fraud prevention filters, ACH rejects, or incomplete account setup.
How do I fix a TIN mismatch?
Contact support and your processor immediately to update your records with the IRS and stop backup withholding.
Will a reserve ever be lifted?
Reserves are typically temporary; money is released once you meet sales and risk criteria or after the reserve period ends.
Can I avoid a reserve?
Stable, low-risk businesses with strong track records usually won’t need one, but new/high-risk businesses should expect it.
What if I need my funds urgently?
Speak with your processor—document your request, share mitigation plans, and ask for exceptions in unique cases.
About IntelliPay
We help merchants optimize their payment processing through transparent interchange plus pricing, no junk fees, expert guidance, and reliable technology solutions. Our team combines deep industry knowledge with personalized service to ensure every client gets the best possible payment processing solution for their business.
Disclaimer
This guide is for informational purposes only. Always consult your payment processor, bank, or tax advisor for assistance with your unique situation and to ensure compliance with current laws, processor agreements, and banking procedures.
By staying informed and proactive, small business owners can minimize delays and surprise holds, keeping their cash flow healthy and stress levels low. [Last updated: September 13, 2025]
