Etsy Seller Woes: Why did Etsy put a reserve on my money

Tiny sellers with small processing volumes, unfortunately, have a bad rap when it comes to solving issues consistently. Etsy is just trying to be smart with this as there are probably hundreds of sellers who are actually flaking out and leaving them holding the bag every day.

A reserve is super common for payment aggregators, like Etsy Pay or Paypal once the volume is above trivial amounts. They don’t trust you’ll pay them back if a customer complains and wins – and any indications of risk (it’s a new account, a big change in sales volume, IP complaints, bad feedback, slow shipping, no tracking) all increase the risk that a seller will flake out.

If you apply for a real merchant account to accept credit cards in a storefront or online website, there is always a credit approval process first. This protects the middle guy (Etsy and their merchant bank in this case) from paying for a chargeback. If Etsy can’t prove the product was delivered, Etsy pays and then comes after the seller to get their money back. In the case of a reserve, they don’t need to loan you the money and then become a debt collector.

Many new business owners hit these roadblocks at some point and then build them into their business plan to keep some % of sales in reserve or learn how to always win the “game” of proving delivery.

If as an Etsy seller you’re thinking about leaving or shutting your shop down because of a reserve, you might consider reading into business cash flow management to calculate whether you have enough working capital for your sales and not taking a paycheck yourself until you do.

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