PayPal's reserve--does everyone pay it?

[dickbaker]

I just added PayPal Web Payments Pro to my site. One of the conditions I agreed to was that they would hold 5% of my total sale price in a reserve for 90 days.

The more I thought about it, the more I'm inclined to question why they do this. My margin on most items is just 10% or so, making the 5% a big bite.

Is everyone bound to that 5% reserve deal, or are there ways to be "unbound?"

[bwnbwn]

no and your crazy to go along with it. making 5% have you figured in the % charge to process that is 2% so now ya down to 3% now .25 per charge as well most likely takes another bite....

Think about it 5% of of 100,000 websites sure makes some nice intrest money.

That's nuts....

[Wlauzon]

..Think about it 5% of of 100,000 websites sure makes some nice intrest money..

PP pays money market interest rates on that...

But no, I have never seen anything about any reserves, but we have one of those Premier merchant accounts or whatever they are called.

[card_demon]

If you are a highrisk business, digital download business, or new one, then PayPal is holding that 5% against you running off and letting them hold the bag with refunds and chargebacks against your customers.

It's common as mostly the idea comes from the banks that sponsor the merchant account.

You have to be careful with PayPal though, they are well known for changing their mind about accounts and suddenly your volume is capped or funds frozen.

[dickbaker]

Thanks for the replies.

After trying to persuade the folks at PayPal that the reserve should be lifted, I remembered something important: I already have a merchant account with a different credit card processor. Duh!

I pay 1.7% through that merchant account. So, I changed my shopping cart to give users the option of paying with their credit card or paying through PayPal.

Not only have the number of orders increased, but the number of payments going through PayPal have decreased.

More money for me, less for PayPal. :)