A small business owner forwarded us an email they received from Square that describes a policy to protect its cash flow in favor of small businesses maintaining liquidity during this coronavirus crisis.

The business owner noted he has no payment disputes or chargebacks, and even after contacting Square’s customer service regarding this issue, they confirmed his account is in good standing with no issues.

Furthermore, he said that none of the links provided by Square worked nor do the directions the payment processor provided to find the “Reserve Report” on his home page or dashboard work.

Square’s Email

We realize this is a challenging time for many business owners, and we remain committed to supporting you.

Like other payment processors, we periodically review your sales to assess the risk of payment disputes. In a recent review of your account, we determined that we have to hold a portion of your transfer in a reserve balance. Beginning <redacted>, 30% of each transaction on your Square account will be stored in your reserve balance, and will be released 120 days after the original transaction date.

What is the function of a reserve?
This reserve is a percentage of your processing volume that is set aside for a specific period of time to protect you and Square from unexpected loss events.

How do we make this decision?
We apply a reserve based on several different factors, including but not limited to:
• Goods or services that may be more prone to receiving payment disputes
• Length of time you’ve been processing payments with Square
• Business documents we may have on file

How does this affect my business?
This does not affect your ability to accept payments in any way. Your reserve balance exists as added protection in the event you receive a payment dispute from a customer and there aren’t enough funds in your linked bank account and available Square balance. That’s when the reserve balance is there to help.

Where can I learn more?
You can find more information along with the current balance of your reserve in your Reserve Report.

Can my reserve change at any point?
We’ll keep an eye on your account and conduct periodic reviews to determine if your reserve should be modified or removed entirely. Of course, we will always notify you of any changes. And you can also find more detail in our Terms of Service.

Why is This Email Troubling?

When the business owner contacted Square’s customer service, he told us they provided no additional information regarding this matter. He wondered why a business with no chargebacks or payment problems is singled out under this policy.

According to him, the company did not give him a specific reason or performance metric that should have triggered the policy, an apparent complete lack of transparency by Square on this matter.

During a time when many companies are trying to help small businesses survive these challenging times, it appears Square is applying non-challengeable actions against small companies with little notice and provides no recourse or actionable details.

This begs the question, why does Square feel the need to hold funds in a reserve account (escrow account) when the merchant account is in good standing?

Recently, Square warned investors it was facing a declining payment processing environment due to the coronavirus outbreak.

Square is a popular payment processor for many small and micro-businesses that require point-of-purchase and online payment processing.

The company’s payment processing service has become a go-to solution for many entrepreneurs as it provides modern integrated off- and online services.

Presumably, many of its customers fall into non-essential business categories and are dealing with rapidly declining sales or a complete business shut-down because of coronavirus stay-at-home orders.

Therefore, Square’s warning about its declining gross processing volume (GPV) may show the company is concerned about its cash balance as it is expecting a larger than normal refund and chargeback volume.

Square Policy Appears to Favor Its Liquidity Over Small Businesses

Since none of the links or directions provided to the business owner to access this “Reserve Report” work, this seems to suggest this is a new policy, hastily enacted by Square.

Unlike small businesses who have to box their way through the narrow door to SBA coronavirus relief programs, public companies have access to capital markets to raise cash if needed.

While card processors and banks may have to deal with more chargebacks during this time of crisis, even in its warning to investors Square still expected a profit.

It doesn’t make any sense for Square to hold funds on accounts that have a perfect record and it seems to be a very Draconian and not a very well thought out plan.

The only conclusion that can be drawn from this action is that Square is more concerned about its liquidity, then the liquidity of the small businesses it serves.

READ MORE: Credit Card Processor Square Faces Lawsuit Over Merchant Payment Holds

Have you received a similar notice from Square? We would love to hear from you and we’ll keep your identity confidential.

Please head over to our Facebook Group for Small Business Sellers and interact with other small business owners.

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  1. I am dealing with issues with Square. They are hold 100% of my transactions for over a week now with not 1 communication explaining why. I have nearly 10k be held or “ suspended “ for no reason. I have emailed just to get an email back after waiting over 24 hours that said they would have someone email me. I have tried every kind of communication platforms to reach out and have no response. As a small business this is putting me in a financial nightmare not being able to use these payments to pay my bills. Not having any idea when or if I will ever be able to get my money. With no explanation why they are holding funds.

    1. I have the same issue. My account was suspended with no explanation. 7606.00$. Been trying to talk to a human for three weeks. Zero results.

      I’m not wealthy, I’m not tach savvy. Just a small business guy that needs that money to take care of expenses. It’s not crippling, but is close.

      The lack of service from one of the worlds giants is telling. Hopefully I’ll find a solution ASAP.

      Done with apple and any product related to them.

    2. Same thing happening to me, don’t understand why they let me open an account and accepted my payments only to hold my funds, cancel my account without a clear explanation… I only talk to bots, my money has been in hold with them for 30 days… They don’t reply my emails, and don’t let me message them. When I call, they say my account has been canceled and Im not able to talk to a real person

  2. Any sane person shouldn’t deal with square, cos they just foul you and ridiculously hold you up for 90 days and when you call after 90 days , they say additional 30 days… it’s too ridiculous that they don’t care if your whole life depends on it, your health or your family , you could literally watch own people die just cos they wanna be about they damned policy

  3. I believe that I know exactly WHY Square developed a “policy” in order to HIGHJACK other peoples’ money, I will get to that after I give you a little backstory, I was days new to Square last August, 2020. and still learning to navigate the site, invoicing, get paid, everything, etc.. With no warning or any questions asked, Square abruptly deactivated my account the day of my first payment. I was not immediately aware, but when I saw that my balance did not transfer to my credit union, I emailed them because the hold at that time was more than 2 hours. I eventually found the initial email telling me that I had violated strict policies and that they were placing my entire balance in reserve until I refunded the money to the customer OR the funds would be held for 180 days max but no less than150 days! They also promised that whatever is left in my balance at the end of the 180 days would automatically be refunded into the linked bank on my account. Unfortunately, my elderly customer paid with a “Prepaid DEBIT Visa GIFT Card” and since his balance on that card was $0, yeah, he had already trashed it just before the waste company came to pick up his one and only can! I promptly asked Square in an email how I should proceed but my attempts to connect or get a response fell on blind eyes and deaf ears. It has now been OVER 6½ months which is over 2 months past the 180 MAX hold. So, now not only has Square violated their own policy, but they have been collecting interest on MY hard earned lil dollars for more than half of the COVID-19-drenched year! I recently sent them an email requesting for them to transfer these funds immediately as they said they would and to also include ALL gains/interest accumulated from these funds, It may be too soon to expect a response. I’ll see.
    IMO: To me it is obvious that there could be only one despicable and possibly criminal reason WHY Square would HOLD/invest hundreds, or thousands, or perhaps maybe even hundreds of thousands of OTHER PEOPLE’S money! Come on, think!…. Okay, you with me now?! Hm, does Square operate all over the world? Wait, just “who” is Square anyway? Jack. OMG, WHAT exactly would Jack DO with all of that “easily stolen/borrowed money anyway? THIS IS EXACTLY WHAT THEY WOULD ” DO” … OPEN HIS VERY OWN _____ ! See for yourself where OUR money is now being held in reserves (this “policy” conjured by Jack and his Attorneys HAS to be criminal and punishable by law, but, will it ever happen to someone like him?)… https://www.engadget.com/square-bank-004443129.html SOMETHING HAS TO BE DONE TO STOP SQUARE! BUT DON’T GIVE MONEY TO CHANGE. ORG THEY’RE ALMOST AS CRIMINAL!

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