Square Payment Terms Review 2026 | Merchant Fairness Assessment

Score Breakdown by Category

How Square's published Payment Terms rate across the methodology's evaluation categories, weighted by real-world impact on a merchant. Automated assessment, as of June 28, 2026.

💰 Fund & Account Control (25%) 33/100

Why this score: the Payment Terms give Square broad contractual discretion over funds and payouts. Section 14 lets Square withhold funds by temporarily suspending or delaying payouts of Proceeds and designate an amount the merchant must maintain in a Reserve, grants Square a security interest and lien on Reserve funds, and authorizes debits from the Reserve or any linked bank account without prior notice. Merchants often experience this as a deactivation, payout hold, reserve, or shutdown.

This is a description of what the published terms permit, not a finding that Square acted unlawfully in any case.

⚖ Dispute Resolution (20%) 42/100

Why this score: Square's terms, like other major processors', route disputes through the company's own dispute-resolution provisions, which generally include arbitration with a class-action waiver. The exact administrator, governing law, any pre-arbitration notice, fee allocation, and any opt-out are version-specific and should be confirmed against the dispute-resolution section of the terms in force for your account before being relied on.

🛡 Liability & Indemnification (20%) 50/100

Why this score: like most processor agreements, Square's terms disclaim indirect, incidental, and consequential damages and cap liability. The practical nuance for a held balance is that the held balance itself is a direct, liquidated amount, not a consequential loss, so a consequential-damages disclaimer generally does not bar a claim for the balance itself. Confirm the specific liability and disclaimer language in the current terms before relying on it.

👁 Transparency & Notice (15%) 52/100

Why this score: Square publishes its Payment Terms with a clear effective date (Last Updated June 1, 2026) and an enumerated reserve and chargeback structure. The opacity is on the risk side: the specific criteria and model outputs that drive a given hold or reserve are not published, which is common across processors.

🔒 Data & Privacy Rights (10%) 48/100

Why this score: covered separately on the companion Square Privacy review. For the fund-hold context, the relevant point is that information and verification gaps are a common stated trigger for moving an account to restricted and pausing payouts.

🚪 Exit Rights (10%) 45/100

Why this score: on deactivation or closure the held balance does not disappear, but Section 14 lets Square continue to hold or delay funds and use a Reserve to satisfy creditor or government process. The held balance remains an amount that is yours subject to Square's stated risk; the question is timing and the risk rationale.

Compare With Other Processors

⚖ Contract powers vs the risk read

Two different things, kept separate on purpose. The left box is what Square's published Payment Terms say, quoted verbatim with section references. The right box is the Terms.Law opinion about what that means in practice for a merchant. The quote carries the weight; the opinion is clearly labeled as opinion.

📜 What the agreement says

Contract text - Square's published Payment Terms, verbatim

Reserve: withhold, suspend, or delay payouts.
“We may withhold funds by temporarily suspending or delaying payouts of Proceeds to you and/or designate an amount of funds that you must maintain in your Square Accounts or in a separate reserve account (a ‘Reserve’).”Square Payment Terms, Section 14 (Reserve) · Last Updated June 1, 2026 · re-confirm section number against the live terms
Reserve used to satisfy creditor or government process; debit without notice.
“The Reserve may also be used to satisfy Square's obligations to hold or remit funds as required by any creditor or governmental authority, including levies, liens, or garnishments.” You also grant Square “a security interest in and lien on any and all funds held in any Reserve,” and authorize Square “to make any withdrawals or debits from the Reserve or any bank account linked to any of your Square Accounts, without prior notice to you, to collect amounts that you owe us.”Square Payment Terms, Section 14 (Reserve) · Last Updated June 1, 2026 · re-confirm section number against the live terms
Chargebacks trigger a Reserve.
“For any transaction that results in a Chargeback, we may withhold the Chargeback amount in a Reserve.”Square Payment Terms, Section 20 (Chargebacks) · Last Updated June 1, 2026 · re-confirm section number against the live terms
Dispute resolution.
Square's terms route disputes through the company's own dispute-resolution provisions, which (like other major processors) generally include arbitration with a class-action waiver. The exact administrator, governing law, any pre-arbitration notice, fee allocation, and any opt-out are version-specific and are not quoted here because they were not verbatim-verified in this pass. Read the dispute-resolution section of the Square terms in force for your account.Square Payment Terms, dispute-resolution section · confirm the operative text on the live terms before relying on it

🧾 The Terms.Law risk read

Terms.Law opinion - opinion, not a statement of fact

The Payment Terms give Square broad contractual discretion to withhold, suspend, or delay payouts and to set a Reserve. Merchants often experience this as a deactivation, payout hold, reserve, or shutdown. The contract is drafted to support a discretionary, risk-based decision.
The held balance is a direct, liquidated sum, not a speculative loss. That framing is what keeps a held-balance claim outside a consequential-damages disclaimer and makes it the recoverable core of any demand.
The chargeback-exposure window for any set of charges is finite. In my opinion, once that window for the underlying charges has passed and delivery is complete and undisputed, the original risk basis for continuing to hold is weaker under Square's own rationale. Pointing to the expired window is often the strongest factual lever.
The creditor and government-process language in Section 14 matters: if a levy, lien, or garnishment is in play, that is a different problem from a pure risk hold and changes both the analysis and who has a claim to the funds. It is worth identifying early which one you are actually facing.
What tends not to work: emotional appeals and reaching for large unsubstantiated lost-profits numbers, which can invite a consequential-damages disclaimer and weaken the strong core claim (the balance itself).

⚖

This column is opinion under a published methodology, calibrated to the quoted clauses. It is not a prediction about any specific account and not a finding of wrongdoing.

⚠ Clauses I Check First

Automated assessment, as of June 28, 2026. Each card is an opinion drawn from Square's published Payment Terms, with the operative language quoted. The quote carries the weight. Verify the current sources before relying on this. None of this is a finding that Square acted unlawfully in any specific case.

Withheld payouts and reserves at Square's discretion

High Risk

The Payment Terms let Square withhold funds by temporarily suspending or delaying payouts of your Proceeds, and designate an amount you must keep in a Reserve. Merchants experience this as money they cannot access.

“We may withhold funds by temporarily suspending or delaying payouts of Proceeds to you and/or designate an amount of funds that you must maintain in your Square Accounts or in a separate reserve account (a ‘Reserve’).” Square Payment Terms, Section 14 (Jun 1, 2026) · squareup.com/legal

Reserve can satisfy creditor or government process, debited without notice

High Risk

The Reserve is not only for chargeback risk. It can be used to satisfy Square's obligations to a creditor or government authority, and Square takes a security interest and lien and may debit the Reserve or any linked bank account without prior notice.

“The Reserve may also be used to satisfy Square's obligations to hold or remit funds as required by any creditor or governmental authority, including levies, liens, or garnishments.” You authorize Square “to make any withdrawals or debits from the Reserve or any bank account linked to any of your Square Accounts, without prior notice to you, to collect amounts that you owe us.” Square Payment Terms, Section 14 (Jun 1, 2026) · squareup.com/legal

Chargebacks trigger a Reserve

Read Closely

A chargeback is an express reserve trigger: for any transaction that results in a chargeback, Square may withhold the chargeback amount in a Reserve. A run of chargebacks can compound into a meaningful held balance.

“For any transaction that results in a Chargeback, we may withhold the Chargeback amount in a Reserve.” Square Payment Terms, Section 20 (Jun 1, 2026) · squareup.com/legal

Disputes routed through Square's own dispute-resolution terms

Medium Risk

Like other major processors, Square routes disputes through its own dispute-resolution provisions, which generally include arbitration with a class-action waiver. The exact mechanics are version-specific and were not verbatim-verified in this pass, so they are not quoted here.

Confirm the administrator, governing law, any pre-arbitration notice, fee allocation, and any opt-out window in the dispute-resolution section of the Square terms in force for your account before relying on them. Square Payment Terms, dispute-resolution section · squareup.com/legal · re-confirm on the live terms

🔎 Go Deeper

The practical detail behind the score: why processors hold or reserve in the first place, the escalation path that produces results, how the arbitration economics work for a single merchant, and how Square's posture compares to Cash App and Stripe. Each block is collapsed; open what is relevant to you.

🔍 Why processors hold, reserve, or deactivate

Processors are not banks in the traditional sense; they are intermediaries that carry the chargeback and fraud risk on money that has already moved. Holds and reserves are their risk-management tools, written broadly into their own terms so the decision sits in the processor's discretion. The recurring triggers, in general experience with this kind of dispute:

Sudden volume change. A spike in sales, a single unusually large transaction, or a fast ramp on a young account reads as risk and can trigger an automated hold or reserve.
Industry or product category. Selling in a restricted or borderline category (supplements, CBD, crypto-adjacent, high-ticket pre-orders, certain digital goods, anything with delayed delivery) raises the baseline risk score.
Chargeback and dispute rate. Elevated chargebacks, refund rates, or customer complaints are the most common stated reason for a reserve or a payout delay, and a chargeback is an express reserve trigger in Square's Section 20.
Delivery timing and pre-selling. Long lead times between charge and fulfillment expand the chargeback-exposure window, so pre-sale and made-to-order models attract holds.
Information and verification gaps. Slow or failed verification, mismatched business details, or unanswered information requests can move an account to restricted and pause payouts.
Model-driven flags. Each processor runs proprietary fraud and risk models whose specific criteria they decline to disclose, so an account can be flagged with no human-legible reason.

ℹ

The decision is almost always framed by the processor as discretionary and risk-based, and the contract is drafted to support that framing. That is the core dynamic: the merchant experiences a hold as arbitrary; the processor points to a broadly worded clause. This is opinion about the general pattern, not a claim about any specific account.

🥋 The escalation path that produces results

This is the generalized sequence that tends to move a held balance. It maps onto the demand-letter service tiers without promising filing or representation.

Documented internal escalation. Exhaust Square's own dispute channel in writing, addressed to its risk or legal contacts, creating a paper trail and triggering any contractual informal-resolution period.
Pre-arbitration notice, if required. Many processor arbitration clauses require a written notice of dispute and a waiting period before a claim can be commenced. Confirm whether Square's current dispute-resolution section requires one; if it does, sending it both starts the clock and satisfies a precondition to arbitration.
Attorney demand letter. A letter on firm letterhead, sent by certified mail and email, framed on Square's own reserve and chargeback sections (Section 14 and Section 20) and the expired-risk-window point, stating the amount and a firm deadline.
Court-ready arbitration demand attached as leverage. Preparing the arbitration demand and enclosing it (not filing it) makes the threat specific and credible. For many mid-size balances this alone can produce a release.
Initiate arbitration if the processor stonewalls. A separately scoped, separately engaged step. Actually filing, paying the administrative fee, and appearing as counsel of record is not part of the demand-letter tiers.
Optional parallel regulatory pressure. Consumer and state-regulator complaints (for example the CFPB and the relevant state regulator or attorney general) are reservation-of-rights options the client may elect, not commitments.

⚠

Scope note. The demand-letter tiers cover steps 1 through 4 (and a first-response review). Actually initiating arbitration, paying the filing fee, and appearing as counsel of record are a separate engagement that is quoted and papered separately. Terms.Law represents merchants in processor fund-hold disputes; nothing here is a promise to sue any processor.

⚖ Why individual arbitration can favor a small merchant

Processor terms typically route disputes to arbitration with a class-action waiver. Counterintuitively, that structure can help a single merchant with a clean liquidated claim:

For a held balance in the low-to-mid range, it is often not economic for a processor to defend an individual arbitration. Administrative and arbitrator fees plus counsel time can rapidly exceed a modest balance, so the rational move can be to release rather than litigate once a credible demand is on the table.
The class waiver that protects a processor against aggregate exposure also strips away the scale defense in a single small case: it must spend real money to fight a small individual claim it cannot consolidate away.
Where the governing terms shift fees to the prevailing party, a meritorious claimant's downside is bounded, which further changes the math. Whether Square's current terms shift fees is version-specific; confirm it before relying on it.

⚖

This is a general read of how the economics tend to run, not a guarantee. Every matter turns on its own facts, the amount, the documentation, and the terms in force. Whether to actually file is a separate decision and a separate engagement.

📊 Square vs Cash App vs Stripe: how the postures differ

Square and Cash App are both Block, Inc. products, but they sit on different contracts, and Stripe is a separate company. On the fund-hold dimensions, their published terms share the same core posture (broad reserve and suspension discretion, disputes routed to arbitration) but differ in the details. The reading below is an automated read of each company's published terms; confirm the current wording before relying on any row.

Dimension	Square	Cash App	Stripe
Account type	Merchant Proceeds and payouts (Payment Terms)	Consumer money and virtual-currency account (Cash App Terms)	Merchant payments account (Services Agreement)
Hold / reserve authority	Withhold, suspend, or delay payouts; designate a Reserve (Payment Terms 14)	Suspend, freeze, decline, delay, or reverse transactions; hold funds on closure (Cash App Terms)	Reserve in a Reserve Account under Stripe's sole control (Services Terms 3.3)
Creditor / government process	Reserve may satisfy creditor or government process; levies, liens, garnishments (Payment Terms 14)	May act in response to a subpoena, court order, or government order (Cash App Terms)	Settles net of amounts owed; general legal-process compliance
Arbitration administrator	Per the version in force (re-confirm against the live terms)	National Arbitration and Mediation (NAM), individual-only, class and jury waiver	AAA, Commercial Rules, San Francisco, California law (US Regional Terms 13.2)

Scores and details reflect an automated read of each company's published terms at the time of review. The Square dispute-resolution row should be re-confirmed against the live terms before being relied on. See the full Stripe vs PayPal vs Square comparison, the Cash App ToS review, and the Stripe ToS review.

Frequently Asked Questions

Practical, frozen-funds questions, answered against Square's published Payment Terms as of June 28, 2026. Each answer is an opinion drawn from the published terms; the quoted clause carries the weight. This is general legal information, not legal advice, and not a finding that Square acted unlawfully in any specific case. Verify the current sources before relying on this.

⚖

Neutral framing on purpose. The Payment Terms give Square broad contractual discretion to withhold, suspend, or delay payouts and to set a Reserve, and merchants often experience this as a deactivation, payout hold, reserve, or shutdown. Describing the contract power is not the same as saying any hold was wrongful. Automated assessment, as of June 28, 2026; verify the current sources.

Why did Square deactivate my seller account?

The Payment Terms give Square broad contractual discretion over funds and payouts; merchants often experience this as a deactivation, payout hold, reserve, or shutdown. Section 14 lets Square withhold funds by temporarily suspending or delaying payouts of Proceeds and designate an amount you must maintain in a Reserve. The common practical drivers are a sudden volume change, a restricted or borderline product category, an elevated chargeback rate, long delivery lead times, or an unanswered verification request; a chargeback is an express reserve trigger under Section 20. This describes what the terms permit and the general pattern, not a finding about any specific case. Automated methodology assessment, opinion based on the published terms as of 2026-06-28; verify the current sources.

“We may withhold funds by temporarily suspending or delaying payouts of Proceeds to you and/or designate an amount of funds that you must maintain in your Square Accounts or in a separate reserve account (a ‘Reserve’).”Square Payment Terms, Section 14 (Jun 1, 2026) · squareup.com/legal · re-confirm section

What is a Square reserve?

Under Square's Payment Terms (Section 14), a Reserve is funds Square holds back, either by temporarily suspending or delaying payouts of your Proceeds or by designating an amount you must maintain in your Square Accounts or in a separate reserve account. In plain terms, a reserve is the processor holding part of your money against the risk of future chargebacks, refunds, and other liabilities. The same section also grants Square a security interest and lien on Reserve funds and authorizes debits from the Reserve or any linked bank account without prior notice. Automated methodology assessment, opinion based on the published terms as of 2026-06-28; verify the current sources.

“We may withhold funds by temporarily suspending or delaying payouts of Proceeds to you and/or designate an amount of funds that you must maintain in your Square Accounts or in a separate reserve account (a ‘Reserve’).”Square Payment Terms, Section 14 (Jun 1, 2026) · squareup.com/legal · re-confirm section

Can Square withhold or delay my payouts?

Yes, under the published terms. Square's Payment Terms (Section 14) state that Square may withhold funds by temporarily suspending or delaying payouts of Proceeds and designate an amount you must maintain in a Reserve. The same section adds that you grant Square a security interest and lien on Reserve funds and authorize Square to make withdrawals or debits from the Reserve or any linked bank account, without prior notice, to collect amounts you owe. So a withheld or delayed payout is squarely within the contract; the question in a dispute is usually whether the stated risk basis still applies. Automated methodology assessment, opinion based on the published terms as of 2026-06-28; verify the current sources.

You authorize Square “to make any withdrawals or debits from the Reserve or any bank account linked to any of your Square Accounts, without prior notice to you, to collect amounts that you owe us.”Square Payment Terms, Section 14 (Jun 1, 2026) · squareup.com/legal · re-confirm section

What happens to held funds when Square deactivates my account?

Square's Payment Terms (Section 14) provide that Square may withhold funds by suspending or delaying payouts and designate a Reserve, and that the Reserve may also be used to satisfy Square's obligations to a creditor or government authority, including levies, liens, or garnishments. The held balance does not disappear on deactivation; it remains an amount that is yours subject to Square's stated risk and any creditor or government process. The balance itself is a definite amount, which is different from speculative lost profits, and is generally the recoverable core of a claim. If a levy, lien, or garnishment is actually in play, that is a different problem from a pure risk hold. Automated methodology assessment, opinion based on the published terms as of 2026-06-28; verify the current sources.

“The Reserve may also be used to satisfy Square's obligations to hold or remit funds as required by any creditor or governmental authority, including levies, liens, or garnishments.”Square Payment Terms, Section 14 (Jun 1, 2026) · squareup.com/legal · re-confirm section

What triggers a Square risk hold?

Square's Payment Terms tie reserves and withheld payouts to its risk management, and a chargeback is an express trigger: for any transaction that results in a chargeback, Square may withhold the chargeback amount in a Reserve (Section 20). In general, the recurring drivers of a processor risk hold are a sudden volume change, a single unusually large transaction, a restricted or borderline product category, an elevated chargeback or dispute rate, long delivery lead times, and information or verification gaps. Each processor also runs proprietary risk models whose specific criteria it declines to disclose. This describes the general pattern and what the Terms permit, not a finding about any specific account. Automated methodology assessment, opinion based on the published terms as of 2026-06-28; verify the current sources.

“For any transaction that results in a Chargeback, we may withhold the Chargeback amount in a Reserve.”Square Payment Terms, Section 20 (Jun 1, 2026) · squareup.com/legal · re-confirm section

How long can Square hold funds?

The verified reserve language in Square's Payment Terms (Section 14) is drafted around Square's discretion to withhold funds and set a Reserve rather than a single published maximum number of days. Any account-specific timeline should be confirmed against your own Square notices and the current published terms rather than assumed. As a practical matter the chargeback-exposure window for a given set of charges is finite, so once that window has passed and delivery is complete and undisputed, the original risk basis for continuing to hold is weaker under Square's own rationale. In my opinion, the expired-risk-window point is often the strongest factual lever to argue a held balance should be released. Automated methodology assessment, opinion based on the published terms as of 2026-06-28; verify the current sources.

“We may withhold funds by temporarily suspending or delaying payouts of Proceeds to you and/or designate an amount of funds that you must maintain in your Square Accounts or in a separate reserve account (a ‘Reserve’).”Square Payment Terms, Section 14 (Jun 1, 2026) · squareup.com/legal · re-confirm section

What documents help get Square funds released?

Documentation that undercuts the stated risk rationale: a clean transaction and balance history showing the held amount as a definite sum, proof that goods or services were delivered, evidence that customers have not disputed, the chronology showing the chargeback-exposure window has passed, customer communications, and Square's own hold, reserve, or deactivation notice. Because the held balance is a direct amount rather than a consequential loss, keeping the claim to that liquidated balance, interest, and recoverable costs is generally stronger than reaching for large lost-profits numbers. This is general information, not legal advice about your account. Automated methodology assessment, opinion based on the published terms as of 2026-06-28; verify the current sources.

“For any transaction that results in a Chargeback, we may withhold the Chargeback amount in a Reserve.”Square Payment Terms, Section 20 (Jun 1, 2026) · squareup.com/legal · re-confirm section

Can I dispute or arbitrate a Square fund hold?

Square's Payment Terms route fund and payout disputes through Square's terms, which (like other major processors) generally include an arbitration clause with a class-action waiver. The exact administrator, governing law, any pre-arbitration notice requirement, fee allocation, and any opt-out window are version-specific and must be confirmed against the dispute-resolution section of the Square terms in force for your account before being relied on. The general escalation path is the same across processors: a documented written escalation, then any required pre-arbitration notice, then an attorney demand letter framed on Square's own reserve, payout, and dispute sections, and only then actually initiating arbitration if Square stonewalls. Filing and appearing as counsel of record is a separate step and a separate engagement. Automated methodology assessment, opinion based on the published terms as of 2026-06-28; verify the current sources.

Confirm the administrator, governing law, any pre-arbitration notice, fee allocation, and any opt-out window in the dispute-resolution section of the Square terms in force for your account before relying on them.Square Payment Terms, dispute-resolution section · squareup.com/legal · not verbatim-verified, re-confirm

How is Square different from Cash App and Stripe?

Square, Cash App, and Stripe share the same core posture on held funds: broad reserve and payout discretion written into their own terms, with disputes generally routed to arbitration. The details differ. Square and Cash App are both Block, Inc. products on different contracts: Square's Payment Terms (Section 14) govern merchant Proceeds, reserves, and withheld payouts, while Cash App's Terms govern a consumer money-and-virtual-currency account with its own suspend, freeze, and funds-on-closure language and National Arbitration and Mediation as administrator. Stripe's Services Agreement frames recourse for unsettled funds as against Stripe and routes disputes to AAA arbitration under California law. The common thread is that the held balance is a definite amount and the expired-risk-window point is the strongest lever. Automated methodology assessment, opinion based on the published terms as of 2026-06-28; verify the current sources.

“The Reserve may also be used to satisfy Square's obligations to hold or remit funds as required by any creditor or governmental authority, including levies, liens, or garnishments.”Square Payment Terms, Section 14 (Jun 1, 2026) · squareup.com/legal · re-confirm section

What should an attorney demand letter to Square include?

A credible attorney demand letter for a Square fund-hold or deactivation is generally framed on Square's own contract sections (the reserve and withheld-payout clause in Section 14, including the creditor and government-process language, and the chargeback-reserve clause in Section 20), states the held amount as a definite sum, sets out the chronology showing delivery is complete and the risk window has passed, sets a firm deadline, and goes by certified mail and email to the risk or legal contacts rather than front-line support. It keeps the ask to the recoverable core (balance, interest, recoverable costs). Terms.Law represents merchants in processor fund-hold disputes; the demand-letter tiers cover the letter and the first-response review, while actually initiating arbitration is a separate engagement. Automated methodology assessment, opinion based on the published terms as of 2026-06-28; verify the current sources.

“We may withhold funds by temporarily suspending or delaying payouts of Proceeds to you and/or designate an amount of funds that you must maintain in your Square Accounts or in a separate reserve account (a ‘Reserve’).”Square Payment Terms, Section 14 (Jun 1, 2026) · squareup.com/legal · re-confirm section

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Cash App or Square restricted your balance? Upload screenshots and transaction history. This is an automated assessment, not legal advice. Terms.Law represents merchants in processor fund-hold disputes; the demand-letter tiers cover the attorney letter and the first-response review, and initiating arbitration is a separate engagement. You can start a request here:

Square Payment Terms Review

Score Breakdown by Category

Compare With Other Processors

⚠ Cash App or Square restricted your balance?

⚖ Contract powers vs the risk read

📜 What the agreement says

🧾 The Terms.Law risk read

⚠ Clauses I Check First

Withheld payouts and reserves at Square's discretion

Reserve can satisfy creditor or government process, debited without notice

Chargebacks trigger a Reserve

Disputes routed through Square's own dispute-resolution terms

🔎 Go Deeper

Frequently Asked Questions

The Bottom Line

What Square's Published Documents Say

Reserves and withheld payouts

Chargebacks and the chargeback reserve

Confirm before relying

Cash App or Square restricted your balance?

Square Payment Terms Review

Score Breakdown by Category

Compare With Other Processors

⚠ Cash App or Square restricted your balance?

Related Resources

⚖ Contract powers vs the risk read

📜 What the agreement says

🧾 The Terms.Law risk read

⚠ Clauses I Check First

Withheld payouts and reserves at Square's discretion

Reserve can satisfy creditor or government process, debited without notice

Chargebacks trigger a Reserve

Disputes routed through Square's own dispute-resolution terms

🔎 Go Deeper

Frequently Asked Questions

The Bottom Line

What Square's Published Documents Say

Reserves and withheld payouts

Chargebacks and the chargeback reserve

Confirm before relying

Cash App or Square restricted your balance?

Related Resources