Paypal Account Reserve: What you need to know

April 18, 2023

PayPal payments
EL Mehdi
Paypal Account Reserve: What you need to know
PayPal reserve - What your online business needs to know

You already know how PayPal has become one of the leading channels for businesses to get paid for orders online. But getting sales is not just about offering the online wallet as a payment gateway on your store - you need to make way for the amount to actually be transferred to your bank account. 

Yes, we’re talking about the PayPal payment reserve that holds the amount a consumer pays for an order placed on your store. 

In this post, we’re going to talk all about PayPal account reserve and how you can remove it. 

What is a PayPal account reserve?

An account reserve is a percentage of your PayPal merchant account balance that's put on hold to cover potential financial risks, including PayPal reversal in the event of a chargeback, claims, and disputes.

For example, if a buyer pays $300 for an item, PayPal will fix a certain percentage for reserve, say 10%, and retain the money ($30) in your account. If a consumer files a chargeback for an item purchased, it will use this amount to reverse the payments.

PayPal payment reserve serves as a safeguard for buyers, ensuring that their funds are safe in the event of fraud or if the item is not delivered or does not match their expectations.

Your merchant account might attract different PayPal account reserves depending on its activities. We'll go over this in more detail in the next part. However, you must log in to your PayPal Business account and check "balance on hold" to get a detailed view of your account's reserves. This can help you understand how much money is put on hold and when it will be released.

Types of PayPal account reserves

As previously stated, your merchant account may have different PayPal account reserves. In this part, we'll go over it briefly and provide examples to help you understand it.

Rolling reserves, minimum reserves, and jumpstart reserves are the three types of PayPal account reserves.

1. Rolling Reserve

The most common type of reserve is a rolling reserve. It's a reserve in which PayPal retains a portion of every transaction you make each day and releases it later.

PayPal, for example, may set a reserve limit of 10% and hold it for a 90-day rolling period. So it will retain10% of the money you got on day one for 90 days before being released on day 91. It will hold the funds collected on day 2  for the following 90 days before being released on day 92.

2. Minimum reserve

PayPal will maintain a certain amount of money in your account as a minimum reserve. PayPal will keep a portion of each payment until it reaches that amount or collects a one-time payment.

For example, PayPal will hold 10% of your daily transaction until a balance of $5,000 is reached, or $5,000 is taken from the available balance and put in the reserve balance once and for all.

3. Jumpstart reserve

It is a sum of money that PayPal will immediately deduct from your account. For example, if PayPal decides to set aside $10,000 as a jumpstart reserve from a total PayPal balance of $20,000. It will hold $10,000 and move it to a reserve account immediately.

Why could you get a PayPal Account Reserve and how to reverse it?

If this is the first time you've had a PayPal payment reserve on your merchant account, you might be concerned about what went wrong. There are many reasons to get a PayPal payment reserve. 

Let's look at some of the reasons that might lead to an account reserve: 

1. Whether or not you synced order information to PayPal or made a manual entry error

It's important to sync order tracking information to PayPal once a customer places an order with your Shopify store. PayPal will hold your money and release it later if you don't. 

Store owners frequently update this information manually, which increases the risk of inaccuracies. Customers may not be able to track their orders if the order information you submit on PayPal is wrong, leading to chargebacks and reserves. 

Note: Install a PayPal tracking Shopify app that allows you to automatically update order information in real-time to avoid this. You save time and get paid 10x faster as a result.

2. Your transaction history on PayPal and with other payment providers

If you don't demonstrate your reliability by completing successful transactions, PayPal may put your funds on hold.

3. Whether your industry has a higher likelihood of chargebacks or refunds

If you work in an industry with a high rate of chargebacks and disputes, PayPal may retain a portion of your funds to limit the risk and protect your consumers. For example, if you sell glass products that have a higher risk of getting damaged during transit, you may have an account reserve applicable. 

4. If your account has a high number of claims and disputes

Because of your record, PayPal will consider your account "risky" and hold funds for a long time before releasing them until it is satisfied that you are trustworthy.

5. Your business and/or personal credit history

Your credit history is an important component in determining whether or not your business is trustworthy. Bad credit history might make your company less trustworthy, resulting in account reserve.

6. Whether you are selling products or services in advance (pre-selling orders)

PayPal account reserve also protects your customers from default in this case.

7. Your delivery time frames

If your account frequently has long delivery timeframes, the odds of a PayPal account reserve are high. In this case, you may want to ensure that your shipping and logistics partners are proactive in the areas you see the most number of orders from. 

Note: You must maintain track of whether or not you've received a PayPal payment reserve so that you can respond quickly and not avoid it.

How often is reserve evaluated by PayPal?

PayPal reviews your merchant account every 180 days to see whether it can adjust the reserve placement or amount. Account reserves are reduced or removed depending on positive changes in key areas such as performance, claims, disputes, industry, etc.

How to reverse the PayPal account reserve?

Online payments might have picked pace in the last few years. 

74% of customers prefer digital payments

Customers, however, still experience post-purchase anxiety after completing an online payment. Customers have peace of mind knowing their money is protected with a PayPal account reserve. 

However, while preventing account reserve is practically impossible, you can lower the risk of account reserve by following these steps:

1. Ensure your order information is synced to PayPal

The most common reason for PayPal payment reserve is not updating order information on PayPal. Once customers place an order, you need to immediately update order information to PayPal. If you don't add this information, PayPal can hold your funds as a reserve. Also, sometimes customers file a chargeback if they can't find order information after making the payment. The increasing chargebacks on your account can again result in a PayPal account reserve.

Many e-commerce sellers update this information manually. The chance of errors is also high when updating order information manually. It's where apps like TrackiPal can help. TrackiPal is a PayPal tracking Shopify app that helps you update order information for thousands of orders within a click. You have to sync the PayPal tracking app to the Shopify store. To get started, click here.

2. Timely Shipment and proof of delivery

Try shipping customer orders promptly and give them valid tracking information so they can track their order status and stay updated. According to the PayPal reversal mechanism, if you print your shipping label outside PayPal, upload your tracking information properly so that PayPal can verify that the package was shipped and delivered.

3. Ask buyers to confirm order delivery 

Inform your customers about the expected delivery date. You should communicate any delays, changes, or other important information.Ask buyers to confirm once they receive the order. PayPal will release your funds as soon as the buyer verifies receipt of the order.

4. Provide quick support and response

Reduce turnaround time for customer queries and concerns. Keep the rate of customer complaints under 1% of your sales volume. Respond quickly to claims and disputes because any delay in the process can lead to complaints from dissatisfied customers.

PayPal Payment Reserve FAQs

Q1: Why is my money reserved on PayPal?

PayPal account reserves are funds held in your PayPal account to offset potential losses from payment reversals such as chargebacks and buyer claims.

Q2: How long does it take PayPal to release funds?

PayPal will determine it based on the type of reserve on your account. It will release funds in a rolling reserve 90 days after receiving them. Minimum reserves will be released within 180 days.

Q3: Will PayPal use the money in my reserve if I receive a chargeback?

No, they'll cover chargebacks with your available balance. When PayPal cannot collect past dues from claims, chargebacks, or debits, funds in reserve will be used.


You can avoid chargebacks and PayPal account reserves by providing order details, proper order fulfillment, and quick services. The increasing chargebacks on your account are a serious concern that you should address as soon as possible.

The PayPal payment reserve also increases as the number of chargebacks and complaints on your account increase. The best way to deal with this is to immediately sync order information on your PayPal account and keep your customers informed. But manually updating order information might be a difficult task. This is where TrackiPal, a PayPal Tracking Shopify app, comes in handy. It saves you the dreaded hours of manually inputting order information. Instead, you sync the app to your PayPal account, and it automatically updates order information for you.

5000+ stores on Shopify trust TrackiPal to update order information and avoid chargebacks and PayPal account reserves. With TrackiPal you get paid 10x faster and make optimum PayPal account use. Are you excited to get started? Click here to install the app and book a free 7-day trial.