Security Deposit
When a payment is made by credit card, a so-called security retention or deposit is due on the cleared amount. For credit cards, the security deposit is between 5 and 15 percent and is usually retained over a period of six months. The security retention is provided for in a credit card acceptance agreement. Here, not only the discount costs have to be taken into account, but also the costs for any refunds and chargebacks. The previously retained funds can be expended in the event of such costs. Also, the security retention protects against fraud attempts on the part of the merchant and can be used in case of violations of Mastercard/Visa regulations.
Amount of the security deposit
In most cases, a fixed percentage of the online store’s expected sales is retained as security. This is usually done over a period of six months. For credit card payments, the amount withheld is between five and 15 percent of the merchant’s projected sales. The security deposit can also be advantageous for the online merchant. Among other things, the deposit serves to prevent the money collected from being spent again so quickly. This in turn protects the merchant from the threat of insolvency in the event of a chargeback. The amount of the security deposit depends primarily on the bank’s risk assessment and also takes into account the existing business model. The deposit can often be reduced after a certain period of time if the online merchant proves to be reliable and the cooperation has been tested.
