PayPal Virtual Terminal and rolling reserves: what’s really happening

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We heard from several sellers at the weekend that they’d had 50%, 60 day rolling reserves slapped on their entire PayPal Pro accounts after applying for Virtual Terminal. PayPal support staff had a few different versions of what the policy is, so we contacted PayPal for clarification. Here’s what they told us:

In 2009, PayPal changed the criteria for approving applications for Virtual Terminal. We started applying 50%, 60 day reserves to a small proportion of new Virtual Terminal accounts. These are applications that would have been declined under the old system because of the merchant’s risk profile.

Virtual Terminal transactions are typically riskier than those handled through a standard online payment flow, in the same way that offline ‘card not present’ transactions can be riskier than in-store payments. For this reason, PayPal is more likely to apply reserves to a VT account than to other products such as Pro. But many merchants using VT will have no reserves applied. And our aim is to make VT more widely available to merchants who would previously have been declined.

If a merchant has a reserve applied to VT then it will probably apply to other PayPal transactions. A merchant who has cancelled a VT application but believes they have had a new reserve applied as a result of the application should contact us as it is likely that the reserve should not have been applied.

I don’t, personally, like the look of that “probably”, and anyone thinking of applying for a VT account should certainly work on the assumption that this could happen. Advice given before still stands: if you need a virtual terminal account, look elsewhere.

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