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There many different payment possibilities and I am curious as to how other owners structure their payments. I usually take a deposit of $500 that is non refundable, and put it on their credit card that I also keep on file as their security deposit. The balance is then due 60 days before their arrival and no refunds after the balance is paid, so I am never returning money. In a ideal world I prefer to receive a check for the balance due so I don't have to pay the credit card fee on the higher balance amount, but most guests want me to put the balance on the card on file. It's nice to have the card # handy so I can do that on the balance due date, but then I get hit with the processing fee. I've often thought about adding a processing fee or convenience fee for the balance. Any suggestions as to keeping processing fees to a minimum and being comfortable getting paid on time? thanks,....Tom
I know there are many different ways owners take payments. Some don't even do a security deposit (the last two rentals we've stayed at), and others don't do credit cards at all.
What works for us is this:
At time of reservation, the cleaning fee ($135 or $150, depending on the house) goes on the credit card to block the dates for the guests. This is nonrefundable. I do not charge a processing fee, as it is less than $3 cost to me.
Then half of the rate is due by check within 2 weeks, along with the rental agreement. The balance is due by check before 45 days of arrival. It they would like any of the rate place on the credit card, I add 3.5% processing to cover the fees we pay out.
If a guest cancels before the balance is due, they will be refunded the half by check. If they cancel after the balance has been paid, there is no refund - unless someone else books the dates. The refund is the amount the new guests pay, in case it ends up being a discounted rate or not all of the dates are rebooked.
The nonrefundable fee they paid in the beginning can be used towards another stay within a year of the originally booked dates if they end up cancelling. This does ease the guests' minds about not losing their money completely. I have found that when they end up cancelling, even after they have sent the first check, they don't ask for a refund but use the entire amount towards a future stay, usually ending up with a longer or more expensive season (i.e. off season then changed to peak).
Oh, and the credit card info stays on file to act as the security deposit.
I include a walk through of how to reserve our homes on our website.
I used to use PayPay but became frustrated with the 60 day Rolling Reserve. My merchant account is classified as vacation rental, which unfortunately is subject to lots of charge backs (which is when a customer disputes a charge and the c.c. processor refunds the customer while transaction is investigated).
Instead, I switched to Payment Processing Inc, (PPI or PayPros). The per transaction fee is lower at 3.1% and $5/month for the plan I chose. The funds are deposited into my business checking within 2-3 days, no reserves. The integration with the HomeAway payment dashboard is seamless and the ability to create future payment requests makes my payment tracking a breeze.
One very important fact I learned during the PPI setup process was how to handle security deposits so they would not incur the same transaction fees (3.1%). I typically request 50% of the total to reserve the dates and 50% due 15 days before arrival. Those 2 transaction are assessed the 3.1% charge. BUT, for the security deposit, I run that transaction through as an AUTHORIZATION ("Auth") in the virtual terminal. The authorization type is a hold on the funds and is not subject to the 3.1% charge because it is never deposited into my account. If for some reason I need to collect the full security deposit or a portion to cover a damage, I search for the transaction and change the "AUTH" to "SALE".
Before with PayPal, I was getting charged every time I refunded a security deposit. With the AUTH, there is nothing to return since the hold is only good for 30 days or until I release it.
I hope that helps!
I just did my first transaction with PPI and was told the "Auth" holding time is only 7 days now. Had to put the whole amount into the charge and will take a hit giving my guest back their security deposit.
I too just spoke with PPI and am very unhappy with this change. And even more unhappy that I had to find out about it on a forum and not directly from them. PPI stated this was something that was coming from VISA/Mastercard and they have nothing to do with it.
He said the minimum auth hold is 7-10 business days. Not counting weekend days. He also said some banks are still 30 days but we won't know which ones they are. It will totally change the way I do deposits, as I only run them as an auth and then a force sale if there is damage.
PPI also stated I could charge a "fee" for the deposit and then run it as a regular payment and take the hit of the % charge. That I will have to check on.
We haven been renting our cottage since 1990. Accepting payment with checks worked for .few years and we thought it was much better than having to pay money to a credit card company. We had so many issues following up with checks not being sent on time...or at all... and missing a rental week or two because the checks never showed up. Worse yet, we had a number of checks that bounced, causing additional cost and documentation and chasing down potential renters. This year we decided to start accepting credit cards. The homeaway group has a great connection with a credit card provider which makes it much easier to get started.
It has made an amazing difference. Our properties are renting much quicker than ever before and the deposit is done immediately. No more waiting for checks to arrive or clear. No more making copies of checks and filing etc. We do it all on line this year and it is so much more efficient. The renters appreciate it as well. Amazing difference.
We ask for 1/2 of the rental price to hold the dates. The other half plus a $200 security deposit and state "use" tax is due 2 weeks prior to arrival. We send out a contract to the renter after we receive 1/2 down. This works well. And accepting credit cards is the best thing we have done for ourselves and our renters in many years.
I totally agree that I like having credit cards in hand to secure the rental and the final balance as well. I just don't like all the charges associated with them. I've been working with Merchantware and requested a rate review and they called me and are lowering all my charges. These things are definitely negotiable and there are alot of competitors out there. they told me that I could have a rate review every 4 months.
Are you using payment processing inc? I was at a Home Away meeting here in Austin last month and one of the HA employees told me that they were introducing a credit card processing program in 3 months with a flat 2.5% rate. Sounds good but I'll be interested to see what other charges there are.
Tom, our merchant account says we're not allowed to charge any processing or "convenience" fees onto guests, so we have to suck up the entire 3+% costs of each transaction. You should check into the legality of pass-on fees, because I think this is only permitted for government agencies, utilities and certain others.
Even though I'd love to be totally credit-card based, with 4 cabins it's a substantial savings to handle payments by check whenever possible. We offer guests the choice, but mention in our inquiry replies that we prefer payment by check if possible. Surprisingly, we find that about 85% of our guests are happy to pay by check. We save a few thousand dollars a year in fees, so it's a huge help to our bottom line.
Our payment set-up is $200 within 5 business days of booking (1 week) and the balance is due 30 days prior to arrival. No refunds within 30 days of check in. In the winter when rental times are much closer to arrival, we take mostly credit card transactions. Yes, it's a hassle to make copies of checks and wait for them to clear...but for us the savings is worth it. The only thing I would say is that being paid in full 60 days before arrival with a no refund policy is probably more practical than our 30 day terms. The 30 days timeframe has worked well for us for many years, so we've just continued with it.
You may not be able to pass on processing or convenience fees but you can charge a booking fee for your labor as long as you charge it irrespective of the means of payment. I charge $45 and that at least helps reduce my cost. I haven't had a single person complain about it. Most management companies charge a fee so why shouldn't I?
You have a strict payment policy which is good. My is a little bit more relaxed. I request half up front and must be paid within 10 days of the contract. The remaining balance needs to be paid at least 2 weeks prior to the check in date with credit cards. With checks it's 4 weeks prior to the check in date.
The way to keep the processing fee down is to negociate with your merchant provider on reducing your discount rate. I use to have a discount rate of 2.49% but was able to reduce it to 2.19% for Visa/MC and 3.49 for AMEX. Any point reduce will definitely help. I could charge the guest but I hate nickel and diming guests with little costs.
Hi everyone -
I wanted to let you know about a weekly ReservationManager webinar where we'll provide an online product demonstration followed by questions and answers between you and the ReservationManager product team.
We look forward to your participation!
Hi Brent -
We are working with PPI now on this integration, although I don't have any specific timing for you at this point. We'll post to the ReservationManager Group once we have more information.