The nightmare of chargebacks and what to do about them
What is a chargeback? A chargeback is when a customer disputes a charge on their credit card. The bank then immediately puts a hold on that charge or, if appropriate, the card itself. If a guest disputes the charges related to their stay at your rental, you’ll be unable to retrieve those funds. Or worse, the funds you have already taken will be refunded to the credit card.
This concept applies to your listings where you are the merchant of record, meaning you are responsible for collecting the payment, either manually online or automatically through a credit card gateway partner. The 2 major booking platforms to which this applies are HomeAway/VRBO and Booking.com. If you list your property on either or both of these platforms for long enough, chances are you will experience this very frustrating event.
Basically, you have two kinds of chargebacks:
· Fraudulent: The cardholder is stating they didn’t make the reservations and the card was used fraudulently.
· Non-fraudulent: The guest feels as though the experience had many issues and it couldn’t be resolved through the booking platform.
TAKE SPECIAL NOTE: If you don’t take extra precautions beyond the normal booking process online via HomeAway/VRBO and Booking.com, you will lose your chargeback case. Period. This is true even if the guest trashes your place and causes untold damage. This is because the guest’s credit card company requires physical evidence that the credit card was in fact used by the owner of the card.
The only types of physical evidence the credit card company will accept are a wet signature from the guest (as found on a contract), a photo of the guest’s ID, and/or a photo of the guest’s credit card. HomeAway/VRBO and Booking.com do NOT collect these items for you. If you do not collect these items yourself, you are out of luck and will lose your case.
Protecting yourself from either kind of chargeback starts with a proactive approach to booking your guest. All the decisions you make before the guest gets the keys to your place are going to save yourself a headache when a chargeback happens, and prevent them from happening in the first place.
How to protect yourself from fraudulent chargebacks:
· Have a contract: A rental contract is the first step to preventing a chargeback. This shows a clear agreement between the name on the credit card in question and the name signed on the contract. While inconvenient, you need a copy of the guest’s wet signature.
· Verify ID: Require ID from the guest either at the time of signing a contract in person or emailed. The name on the ID matching the name on the reservation is another step in verifying the identity of your guest.
· Collect a photo of the guest’s credit card
If you choose to have a guest sign a rental contract, you’ll need to present it before a guest makes their reservation. You must also explain in your listing that a guest must sign a rental contract. A guest has a right to cancel without penalty if they are not allowed to review the terms of agreement before booking.
· Guest Verification: Use a service that provides a Trust and Safety Partner. These services use a guest name and home address to the guest identity and checks global and crime databases.
Having a signed contract, ID, credit card copy, and verified identity will make the process of a chargeback go in your favor. Having this in your listing information is also a great way to avoid a guest that might be planning to fraudulently stay and then file a chargeback.
Avoiding a non-fraudulent chargeback all comes down to procedure follow-up.
· Let them know your cancellation policy at checkout: Provide a “click to accept” acknowledgement button. This will ensure that the guest has read your list.
· Make sure your property description is accurate: This will avoid any surprises. This includes parking, size of the space, the location, and surrounding neighborhoods. Make sure there are no surprises.
· Keep the essentials in good working condition: Remember to look at things from the guest’s perspective. Something you might find an inconvenience might be important to a guest. Is your AC working, is your WI-FI/internet in working condition and connected? Is your pool heated and if not, is it in your description?
· Address concerns before things escalate into a dispute: A small discount or accommodation might satisfy a guest and prevent a chargeback for the full account later. The faster you address concerns the less likely it will become a big issue.
Even with all this protection in place, eventually you’re going to get a chargeback. Follow these steps to take the stress out of the process.
· Be patient and stay calm. The bank has no stake in the outcome. They are just doing their job.
· Respond quickly. Make sure to check your email and accounts frequently and once a chargeback has been initiated, it’s important to follow up with the bank.
· Provide all requested information. The bank is trying to verify if the owner with the card made this purchase. If you have a matching ID and contract, you’re far more likely to have an outcome in your favor.
Any kind of chargeback should be a learning experience. It will help you improve your rental agreement and contracts, your customer verification, and prompt you to take a hard look at how you manage your property. These not only will improve your management experience but the guest experience as well. It can be feel like a huge headache but in the end, even if you don’t prevail, it will help strengthen your process.