Glossary

Escrow account

An escrow account is an arrangement where a neutral third party holds money for a transaction and releases it only when the conditions both sides agreed have been met.

Last updated 29 September 2026

The definition

An escrow account is a holding arrangement. Instead of one party paying the other directly, the money is given to a neutral third party who holds it until a defined condition is satisfied, then releases it to whichever side the condition favours.

In property, the condition might be the completion of a sale. In a marketplace, it is simpler: the condition is that the buyer receives the goods, and the release is triggered by the buyer confirming, by a fixed waiting period expiring, or by the resolution of a dispute.

  • The buyer's money leaves their account immediately, so the seller knows the funds are real.
  • The seller does not receive the money until the condition is met, so the buyer is not exposed.
  • The third party controls the release, which is what makes the arrangement neutral rather than a favour to either side.

An escrow arrangement is not a bank account

It is common to describe escrow as “the money sitting in a safe account”, which implies more than most arrangements provide. An escrow hold is a contractual and operational arrangement about who may move the money and when — it is not a deposit account in the buyer's name, and it does not normally carry deposit insurance.

It is worth being precise about this, because the protection being offered is specific: the seller cannot take the money before the order is delivered, and either side can freeze the release by raising a dispute. That is a real and useful protection, and it is narrower than “your money is guaranteed”.

What escrow does and does not cover

Escrow protects the transaction from the other party. It does not insure the goods, and it does not turn a marketplace into a bank. Anyone promising the broader version is describing a product that does not exist.

How escrow works in a marketplace

  1. 1

    Payment is made into the hold

    The buyer pays the platform rather than the seller. The seller can see the order is paid, which is what gives them the confidence to ship.

  2. 2

    The seller performs

    The seller accepts the order and dispatches the item, marking it as sent. In most marketplace escrow flows this starts a clock.

  3. 3

    The condition is tested

    The buyer confirms receipt, which releases the funds, or raises a problem, which freezes them, or says nothing, in which case an automatic release happens after a set period.

  4. 4

    Funds are released or refunded

    The money goes to the seller, less any commission, or back to the buyer if the dispute is decided in their favour.

On ChatCart those periods are concrete: the seller has 24 hours to accept an order, and the funds release automatically 48 hours after the order is marked as sent if the buyer neither confirms nor disputes.

Frequently asked questions

What is an escrow account?

An arrangement where a neutral third party holds money for a transaction and releases it only once the agreed conditions are met — in a marketplace, usually delivery to the buyer.

Is escrow the same as a bank account?

No. Escrow is a holding arrangement that defines who may move the money and when. It is not a deposit account in the buyer's name and does not carry deposit insurance.

Who does escrow protect?

Both sides, in different ways. The buyer is not handing money directly to a stranger, and the seller is not shipping against an unverified payment claim. Each side gets certainty about a different half of the deal.

Who decides when the money is released?

The rules of the arrangement. In a marketplace that means the buyer confirming, a fixed waiting period expiring, or a dispute being resolved by the platform.