What is a refund reserve?

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Our partners are required to maintain a small refund reserve when using Elective Billing to process any potential refunds or disputes that may come up in the normal course of business.


Refund Reserve Balance

When you begin using Elective Billing, a refund reserve is set and highlighted in your Merchant Portal under Settlements. Once the refund reserve is in place, any payments collected will be used to satisfy the reserve requirement and any amounts in excess of the reserve will be paid out directly to your bank account.

Ultimately, we aim to be the best possible partner for you and your business and as we build history together under this product, we will be in a better position to optimize and reduce the reserve where appropriate. 


Refund Reserve Calculation

Initially, your refund reserve will be set to 2x the maximum payment a student can make. For example: if you have a $9,000 program split into 9 equal payments of $1,000, your refund reserve would be $2,000 initially. This is done by taking the maximum payment a student can make of $1,000 and multiplying it by 2. As mentioned above, this is solely used to ensure any refunds or disputes can be processed without any issues or delays. 

In other words, our system calculates your refund as:

Refund Reserve = N * max[Price/Term Ratio]


  • N = A variable that's automatically adjusted by our system based on your volume of refunds and chargebacks. This is set to 2 by default.
  • Price/Term Ratio = The price of an active Elective Billing order divided by the term.
  • max[Price/Term Ratio] = This is the highest Price/Term Ratio across all of your Elective Billing orders.



You have two Elective Billing orders:

  • Order 1:
    • Price: $9,000
    • Term: 9 Months
    • Price/Term Ratio = 9,000 / 9 = 1,000
  • Order 2:
    • Price: $6,000
    • Term: 3 Months
    • Price/Term Ratio = 6,000 / 3 = 2,000

Your refund reserve would be $4,000 and is calculated as:

Refund Reserve = 2 * $2,000 = $4,000


Refund Reserve Usage

We will always attempt to use your refund reserve first whenever a refund or chargeback is processed but there may be times when your refund reserve does not have enough funds. This is something we want to minimize as much as possible but if you don't have sufficient funds, you will need to fund the reserve with new orders before any payouts are received.

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