Every so often, Etsy updates their seller policies, aka their “House Rules.” And recently, they made some changes to its payments, which could affect you.
The changes took place on February 23, 2021. And in this post, I wanted to talk about what’s different so you’re aware.
Below, I go over everything I’ve learned about Etsy’s new policy and address potential concerns you may have.
Get extra protection with Etsy’s payment account reserves
What is a payment account reserve and how does it work?
Payment account reserves apply to certain Etsy sellers — mostly new sellers. If you’ve been selling on Etsy for more than 90 days, you likely won’t be affected, although other parameters aside from shop age are taken into account (more on that below).
This is what Etsy has said about payment account reserves:
“More and more people are doing their shopping online and millions of new buyers have recently discovered Etsy, but that also means some sellers are seeing an increase in order disputes and issues. To keep buying and selling on Etsy safe and easy for everyone, we’re introducing payment account reserves. For now, this means some sellers may have a reserve placed on their account for a short period after their first sale.”
If this applies to you, a percentage of the funds in your payment account balance is held before the funds become available for deposit. This is to prevent shop balances from going into negative numbers due to shop expenses and fees, refunds, and chargebacks from customers’ credit card companies.
The funds in the reserve are held only temporarily. After the reserve period has ended, any remaining available funds are released to you on a rolling basis.
If, however, during a reserve period, a customer files a case or a chargeback against you and you do not have enough funds in your reserve to cover the refund, your reserve funds are not released to you.
What percentage of funds does Etsy keep in the reserve and for how long?
The amount of funds Etsy requires the reserve to contain and the length of time those funds remain in the reserve depend on sellers’ risk factors, which Etsy’s risk team uses to determine a threshold amount and timeframe for sellers’ reserves.
These thresholds also dictate the amount of available funds to deposit and the amount of pending reserve funds. Funds exceeding the amount of your threshold reserve may be deposited.
But funds below the threshold reserve must remain in your reserve until that reserve period is complete, and funds from future sales will be added to your reserve to maintain your threshold.
If it’s decided that your shop requires a reserve, you’ll receive an email detailing the percentage held from your payment account and the reserve length of time.
Reserve funds may be withheld from sellers’ available funds for up to 180 days and they may be deducted from sellers’ payment accounts for up to 90 days.
The risk factors that Etsy takes into consideration are as follows:
- How long your shop has been open, including the length of time since you made your first sale
- Your sales details, including your average earnings and volume
- Any order backlogs you might have
- Availability of tracking information on orders once they ship
- Whether your products are made to order or ready to ship
- Ratio of sales to disputes filed by customers
- Any suspensions or warnings you may have received
- Estimated shipping and delivery times
- Active orders’ shipping status
Are there different types of payment account reserves?
There are two types: fixed and variable.
With a fixed reserve, the percentage of your payment account balance that’s held in your reserve is set for a specified period of time. It does not fluctuate.
On the other hand, with a variable reserve, the percentage can fluctuate, depending on your shop’s activity. Your shop’s activity is influenced by things like…
- New sales, refunds, and chargebacks
- Applicable charges to your payment account
- And reserve amounts released at the end of each reserve period.
For some sellers, a variable reserve may be used in addition to a fixed reserve. This is up to Etsy’s discretion. Etsy places account reserves on sellers’ accounts on a case-by-case basis.
How can I have a payment account reserve removed from my account?
This is entirely up to Etsy. If their risk assessment of an account changes due to positive performance indicators, Etsy may reduce the percentage of reserve funds and/or reserve period or they may remove the reserve altogether.
Etsy notifies sellers of any changes to the terms of their reserves.
What can I do to reduce the likelihood of having a reserve placed on my account?
The best offensive approach you can take is to keep your account in the best standing possible. Here are some best practices for your Etsy shop:
- Respond to customers within 24 hours, including disputes
- Ship orders on time and adjust your processing times if necessary
- If orders are dispatched without postage labels purchased on Etsy, don’t mark those orders as having been dispatched until they’ve been dropped off with your carrier
- Include tracking information as often as possible
Where can I learn more about Etsy’s payment account reserves?
Here are two resources from Etsy that go over everything you need to know in more depth:
If a payment account reserve is applied to your account, you can take Etsy’s survey to leave your feedback by clicking this link.
And if you’d like to learn how Etsy’s new payment policy compares to the old one, check out this link from AdvancingAiden.com.
What are your thoughts on Etsy’s payment account reserves? Do you think this change is helpful or hurtful to sellers? Let us know by leaving a comment below. And if you enjoyed reading this post, please consider sharing it with your friends and followers.