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After a couple incidents last year we will be requiring a security deposit for the first time this year and I am looking for some advice. We do somewhere between 50% and 75% of our bookings through PayPal so refunding security deposits will be fairly easy to do there but we still have a lot of guests who like to pay with a Personal Check.
What is the best/most secure way to handle a security deposit made via Personal Check? Should I deposit the check right away (14 days prior to the guests stays) and then write them a check back after going through the property?
Thanks for your help!
I will not accept a personal check within 30 days of the check in date. Even though checks are supposed to clear within a few days, and most do clear quickly, the ones that really are frauds may not be rejected by the banks until several weeks after they are deposited.
When I receive the guest's deposit by check, I do deposit it immediately, and refund the deposit by check.
I do most of my business by check. When I receive one 30 days or less from check in day I call the bank it is issued from and tell them I am a merchant and their account holder has given me a check. They ask for the account # and sometimes the check # and the amount and they tell you if the check is covered at that moment in time. It doesn't totally rule out problems but it does make them less likely.
I agree with Sage, always deposit checks quickly. Also always refund payment the same way they paid you (and only to the person who paid you!).
I would avoid using checks for the deposit payment. You need that to book the place immediately so not only are they inconvenient timewise, but also can be more problematic as you have pointed out. Why not require credit cards at least for the initial booking/deposit? They can easily be refunded via PayPal or Reservation Manager. You can still allow checks for the actual rental payment due later. We have had zero issues this way.
And yet, many of us are perfectly happy with checks for deposits. You must decide based on the lead time for your reservations -- if you can cash a deposit check at least 30 days ahead of the rental, then go ahead. If your rentals tend to be last minute without that lead time, then you really must move to Paypal or credit cards.
I think you misunderstood what I meant by the time factor; it is not a matter of just "lead time". You need a deposit payment to book or hold a reservation. Therefore, there is no way we can turn down other offers who are willing to pay upfront via credit card in order to wait for someone who (says) they sent a check, receive it by mail, deposit it and then wait for it to clear. We simply cannot afford to risk losing business that way.
Besides, why wouldn't a renter want to pay at least the deposit by credit card? It saves them a stamp, means less work for them and a quicker reservation confirmation, they have the security of a credit card to back up their payment, and they get the deposit refunded back anyway so it's not even a real issue. And of course it is much easier to refund a credit card deposit. I can only think of reasons why a check is far less practical for the deposit. Is there any reasons you can think of where it would have an advantage?
Of course as I said before, with the rental fee it is a whole different story. We accept checks often for that.
Swlinphx, it is not clear to me which type of deposit you are referring to: a reservation deposit or a security damage deposit. Most of the points that you raise seem to apply to a reservation deposit, but then you state that "they get the deposit refunded back anyway." Reservation deposits are usually not refunded to the guest but security deposits (hopefully) are refunded.
With regard to security damage deposits, I totally agree with Sage that you must receive and deposit the check at least 30 days before the rental to make sure that the check clears. That said, I can think of one very major advantage of a security deposit paid by check rather than by credit card or Paypal. Once the check clears, the owner has actually received the renter's money and the renter cannot dispute the damage charges with their credit card company or Paypal and receive a charge-back.
I only have one vacation property and it is rented out many months in advance. Fortunately, I don't have to worry about payment for last-minute reservations. I only accept personal checks. I don't have to pay credit card or Paypal fees, and I don't have to worry about a disgruntled guest trying to receive a charge-back from their credit card company or Paypal after they have stayed at my property. I don't mind writing out and mailing a check refunding the security deposit. I do it promptly and include a letter thanking the guest for staying at my property and asking them to submit a review of the property to VRBO. Every property owner/property manager's situation is different. This business model works for me.
Thanks for your input mlbmaine. I can see your point about worrying about charge backs, but if that's the case you must not take credit cards for any payment for any business you run and that's not realistic for us in this day and age. Theoretically you could worry about a dispute on the rental fee too if they paid by credit card, so that really isn't a point that makes a difference to me. FYI, I refer to the "security deposit" (damage deposit) different from a "rental fee". We only take two payments, the security deposit and the rental fee. If I did not make it clear, I am talking about the former.
However, you still did not address my issue about checks. Let's say they don't care that they have to write and mail a check (paying postage) and then wait several days to a week or more for it to arrive, be deposited and clear. Let's say you don't mind going to the bank to deposit a check every time, then writing and mailing checks with postage to refund. In today's world I find that archaic, but so be it.
You still did not acknowledge my point about losing business. A customer should prefer credit card for the security deposit (not necessarily rental fee) because they get the security of their credit card backing them up, as well as immediate payment and reservation confirmation and no hassle with mail. In addition to it being easier for you to refund, despite what you said there is no credit card fee on an amount that's refunded, so that point is moot. And finally (and most importantly) you don't lose business waiting for someone who "says" they mailed a check or to mail it, wait for it in transit, get the check and take it to the bank, then wait a few days to clear while losing business of anyone else who wants your property and is willing to pay immediately in all those days you are holding those days without payment of any kind. That risk is not one we're willing to take, especially when in every way a credit card is easier. I enumerated many advantages but that is the most important. The one advantage you mentioned, worrying about a charge back is actually a reason a customer would want to pay by credit card. But even so, are you not going to accept credit cards in this day and age because for anything that is paid you are worrying about a charge back? We have not had one in hundreds of rentals over almost nine years now. I just don't see how that is really an issue considering all the benefits I mentioned.
But you're certainly right; everyone can conduct business as they wish. I wasn't writing this just for you however, but to anyone reading this who is considering both options to make a decision based on the differences between the two.
Here's what we do ( on the advice of our attorney when we set up our system, so you should check your local laws).
We require 50% of the base rate + a completed rental Application/Agreement to confim a reservation made more than 30 days prior to date of arrival. Typically this is done by credit card. The balance due (remaining base rental, taxes & cleaning fee ) is due 30 days prior to date of arrival- also normally done by CC. Less than 30 days ALL monies have to be paid by a credit card.
Our Damage Deposit: We will accept a personal check. I hold it until our home's been inspected upon check out and simply return it uncashed if all is well. HOWEVER, our Rental Agreement has a seperate page that offers them a choice between charging their credit card the DD or paying by check and it spells out the process for this that they must sign and date.. In my state, but them signing the Damage Deposit Agreement and sending me a check with Damage Deposit noted in the explaination field it becomes a legal contract.
So far, so good. If someone wants be a **** and do a charge back, or cancel a check then I guess they will. But I have a legal document should I need it.
It may sound a bit complicated, but once I set it up it's easy.
... I can see your point about worrying about charge backs, but if that's the case you must not take credit cards for any payment for any business you run and that's not realistic for us in this day and age
Actually, I do just fine using only personal checks and the occasional Paypal transaction for a last minute rental. So, yet, it is quite "realistic" for me and many other owners. Not everyone has to follow the same model and there are serious regional differences. Perhaps in your neighborhood, credit cards are necessities, but the standard in my town is to accept personal checks.
you still did not address my issue about checks. Let's say they don't care that they have to write and mail a check (paying postage) and then wait several days to a week or more for it to arrive, be deposited and clear. Let's say you don't mind going to the bank to deposit a check every time, then writing and mailing checks with postage to refund. In today's world I find that archaic, but so be it....
"Archaic"???? What is the point of this name-calling? Let's be civil here!! If you can't win an argument without resorting to name-calling, perhaps you should examine the strength of your argument. As a matter of fact, my guests do not mind writing and mailing checks -- they are quite comfortable with it. And, as a matter of fact, it's really not a problem depositing checks for me; thanks for your concern, but I manage just fine. In fact, I LOVE going to the bank to deposit checks. (And haven't you heard about that great smartphone app that allows you to take a picture of the check to deposit it -- oh, so archaic!) My guests usually make reservations 6-12 months ahead, so a few extra days waiting for mail is really not an issue. And while you think you have more security by getting a credit card today to secure an instantaneous deposit, you actually have less because the guest could cancel the charge tomorrow.
...You still did not acknowledge my point about losing business. A customer should prefer credit card for the security deposit (not necessarily rental fee) because they get the security of their credit card backing them up, as well as immediate payment and reservation confirmation and no hassle with mail...
You are absolutely right -- a customer does have more protection using a credit card because they can challenge the charge. But, measure for measure, that means I, the owner, have less protection. You may choose to take that risk, but I prefer not to. (I also hate the thought of paying those credit card fees!!)
I happen to agree with you that a person just starting in this business should consider credit cards as a way to appeal to more segments of the market. But remember, Laurel's original question was not whether she should use credit cards or checks, she wanted to know how to handle checks from customers who preferred to use checks. So, a VR owner who refuses to take checks is just as likely to lose business as one who refuses to take credit cards. Many people are hesitant to give a credit card number to a stranger over the internet -- and with very good reason!
One of the great things about this community is that we see there are many business models that work. There is no "one-size-fits-all" way to run a VR. Swlinphx, I'm glad you have a business model that you like and you are welcome to explain why you like your model. But please avoid the name-calling!
Name-calling? Are you being extremely overdramatic or what? Where did I call you a name? Absurd histrionics don't really count as validating your argument. Talk about a stretch! Please copy & paste this name I called you. I am curious what it is.
And I stand corrected: Credit cards are apprently a new technology that according to you is popular "in some neighborhoods" as you put it but not yours. I don't even get what you meant by credit cards not being popular where you live, but be sure say hello to your neighbors Fred & Wilma for me.
And who said we do not take checks? Never said that, but you did indeed yet again avoid addressing my most important point. So here it is again directly quoted, for like the third or fourth time now:
And finally (and most importantly) you don't lose business waiting for someone who "says" they mailed a check or to mail it, wait for it in transit, get the check and take it to the bank, then wait a few days to clear while losing business of anyone else who wants your property and is willing to pay immediately in all those days you are holding those days without payment of any kind. That risk is not one we're willing to take, especially when in every way a credit card is easier.
I don't mind doing the banking. We're well booked and things are going smoothly accepting only checks as form of payment. I cash the deposit and then write them a check refunding it after check out and inspection. That procedure doesn't bother me at all. Not cashing the check would allow someone to stop payment on a check if they knew they had been negligent with our home. Writing them and check and mailing it has turned out to be a good follow up procedure for us. I always write a personal note with the check. It's a nice personal touch that our guests seem to appreciate. When I e-mail them to tell them I am mailing back their deposit, I ask them for feedback on their stay with us. Most people reply. If that reply is a positive one, which it has always been thus far, I ask them if they would be willing to write us a review and I send them a link. So far, we've received 24 positive reviews in a 18 months of doing business so it's working well!
We do it the same way and it has been working very well. If I had more than one property I could see it being more of a hassle, but I prefer checks over Paypal or the like. We have 38 reviews of the past two years so I could not agree more with doing it this way. I am new school when it comes to most things but this approach just works great for us.
Sorry I'll be honest I haven't read every single reply, my question is in regards to accepting security deposits by CC. When you refund them that money don't you lose alittle of that money due to the % you must pay the CC company. I know its between 1.5-3% depending on who you use. Do you just eat that cost or pass it on to the renter some how.. I used to take Sec dep. by ck only then I went to the damage waiver ins. now I'm going back to the sec. dep. thanks
gr- yes, you do have to pay the CC fee on any transaction. Of course, it's a tax write off to you, as is any bank fee.
There's been a recent court settlement that does allow businesses to pass on such fees though I've not gotten a detailed explanation from my accountant as to how or if I'll do this. I'll let you guys know what I find out.
Very seldom do I charge the Damage Deposit to the credit card. Normally I take a seperate check.
You should check with your accountant if you're thinking of passing on a CC fee. I THINK you can charge a convienience fee, but I'd check.
If you use Reservation Manager, credit card fees are also refunded.
What do you mean exactly? You do not pay a fee when refunding a credit card deposit. It is refunded to you, which is a point I made a couple times above. People who are heralding check writing are telling you that to make a case, but it doesn't make it true.
My procedure is to take either credit card or EFT for the reservation deposit that way I know the week is booked immediately. I prefer EFT as I get immediate funds without dealing with written checks and the fee charged is very small. I ask the guest to pay the balance either by mailing a check or EFT (electronic check) which they seem to like. I charge a $80 booking fee which I waive if they pay by check or EFT so I save the credit card fees which can really add up over the course of a year. I put a preauthorization hold only for the damage deposit which I release after the check out inspection, thereby avoiding any fees at all on this and the process is simple.
How do you get the EFT set up?
I use PPI for my credit card processing and they allow me to run EFT's. My rental agrmt asks the guest to give me routing number and account number for the charge and PPI charging $4.99 for the transaction. It works very well, there are some guests who aren't comfortable giving this information and those usually pay the rental deposit with a c/c and then mail a check for the balance.
Different strokes for different strokes - ain't life interesting...
Here is what we do...
For advanced bookings, a personal check for the deposit (along with the signed rental agreement) is due within 7 days of booking to allow for mailing across country. The reservation is considered tentative until we receive the check and signed rental agreement. If someone else inquires about the same timeframe they get added to the waiting list. Then the balance, also via personal check, is due 30 days prior to arrival (45 days for holidays and stays of 7 night or more). The security deposit is refunded via personal check after the stay.
For short-notice bookings and overseas transactions, we use PayPal and payment and receipt of the signed rental agreement needs to be completed within 24 hours of booking. After the stay, the security deposit is refunded via PayPal. PayPal refunds the cc fees for the refund amount. However, I have heard that PayPal favors the renter over the owner if there is a charge-back. Thus, I am thinking about requiring the security deposit to be paid via personal check if it is at least 2 weeks prior to arrival. I have been told that a check clears within 7 days. We do not accept cashiers checks or money orders since they are easy to counterfeit.
If someone really wants to pay by cc for an advanced booking, we will allow it via PayPal. I am not going to argue over a 3% fee for the occasional person that might be uncomfortable paying via personal check. We do charge an out-of-country transaction fee to cover the cc fees for overseas transactions.
I would never take a credit card number over the phone due to the problems related to ID theft. People that do take cc's over the phone have to have security measures in place to do so.
This has worked well for us for over 15 years.
For advanced bookings, a personal check for the deposit (along with the signed rental agreement) is due within 7 days of booking to allow for mailing across country. The reservation is considered tentative until we receive the check and signed rental agreement. If someone else inquires about the same timeframe they get added to the waiting list. Then the balance, also via personal check, is due 30 days prior to arrival (45 days for holidays and stays of 7 night or more).
So if someone wants your place and is willing to pay now you give priority to a stranger who says the check is in the mail, wait for it (if it is in the mail or until they mail it), deposit it and wait a week?? You turn down people paying up front because you put your faith in a stranger who has nothing to lose by changing their mind? We could never do business that way. First pay = first booked. Period.
Yes, waiting (5 business days) for a check in the mail has worked for me for 15+ years. If someone else wants to be put on a waiting list should the check not arrive in time, then they can request that. But a check not arriving in time has maybe happened only once in 15 years. Many people will send their check by Fed Ex overnight which we do not require - waste of money IMHO. And I have NEVER had someone not book because of asking for payment by personal check. I had someone ask once if they could pay by cc and I told them "yes" and told them I would send a request for payment via PayPal, but in the end they changed their mind and sent a check anyway.
You and I have been around and around about this and how we manage our calendars and I think we can agree to disagree with how each other does things.
Except that you're not quite stating the whole process.
1) They will send a check if they don't change their mind or find something else after they speak with you. Why not since they have no obligation and nothing to lose.
2) If they do decide to book with you then you have to wait for them to first mail the check. Some may do so immediately, others may take a few days. Who knows? These are strangers.
3) You wait the 3-5 days for postal mail as you said.
4) You then deposit the check. It may take you a day or two to do that if you don't get to the bank immediately.
5) Finally, you then wait a week or so to know if the check clears or not.
All this time you are willing to turn down paying guests because of what a stranger told you over the phone? Or put them on a waiting list so that two weeks later if it all falls thru and it takes you that long to know since you did all this by postal mail and check, you are expecting them to still need a place and not have found something else? Of course you can do that if you wish and you can claim that all the people you deal with are always honest and you've never had issues, but it's not realistic. You are basically saying there's no need to take precautions, just trust an inquiring stranger will do what they say and not change their minds and be conscientious. It's up to others if they are so trusting in putting their business revenue in the hands of strangers they don't know. We are not, and I can tell you most people are not which is why hotels require a credit card to book or DVD rentals require a credit card on file, etc, etc. etc.. I am writing this for others to read now and in the future. This is not about trying to change your mind or how you do business, so no need to address it as if it is. This isn't all about you or Carol or anyone here who insists on sticking with the old school of checks. It is a fact that any rental or booking for just about anything in today's world requires a credit card for the very reasons I've enumerated. I honestly don't care how you run your business, but I don't want people like Laurel (the OP) reading this to think that is the norm or even that they should follow suit. I'm speaking logically and what is a fact in today's world.
But yes, truth be told, holding onto a past system and being unwilling to change with the times in general is not a lucrative business practice -- you learn that in Business 101. Businesses have to accommodate the majority of customers in the easiest and most efficient way. Let those reading this decide what works for them, based on the points I've made and what you have said too.
I'm not sure how I missed such an entertaining discussion. I think everyone agrees that owners can manage their business anyway they please. It is also true that things over change over time and doing somethig because "that's they way I've alwys done it" is likely to leave you behind. For the older in the group (me included), there are some things you should know about the 20 somethings (I have them, and work with them daily)
1) They don't have a check book
2) They've never written a check
3) They never look at a written bank statement (if they need a copy they'll go online and print it, but usually they just use the banking phone app to confirm transactions)
3) They deposit Grandma's check with their smartphone app.
4) They don't have, and will never have a land line.
5) They don't need directions - just an address for their navigator
6) If you want to contact them, you need to text them because they rarely answer their phone
7) They live their life online and adopt to new technologies very quickly
I can go on, but it is a different expectation for those that grew up with this technology.
Totally agree... and this is why we MUST talk via the phone to anyone that is interested in booking with us. "The Fit" must be right since our property is so very unique... i.e. we are off the map and a GPS device does not work in our area, etc., etc., etc...
I think it's perfectly find that owners handle their business anyway they see fit. We're not selling candy bars here. There's usually quite a substantial amount of money involved - not to mention our homes!
My advice is anyone new to this buiness ( or any other type that requires exchange of funds) is DO YOUR HOME WORK, really research and then do what works best for you. There are many options out there and if you advertise on more than one site you find that out quickly. Make sure you have documentation of whatever plan you use so you know exactly the process and policies for refunds, etc. - even if it just from your local bank.
When you get your 1099 from the processing firm you use ( if you use Credit Cards its now required that they provide this to you) you'll want to be able to reconcile that with your reciepts of income for the IRS.
That bobbie I agree with you on 100%, but that has also been a controversial topic that sparred heated debate on past threads here as well, with many claiming they don't like to be bothered by phone or having any live contact with their guests. I just err on the side of more knowledge and safety precautions are better than less.
It is absolutely essential that we speak to each and every potential guest. We are not absent owners and live on the property and interact with our guests. We want to make certain that our guests know this. We are required by county regulations to have an onsite manager since our ranch is on agricultural-zoned land. It is for the protection of neighboring ranchers and their privacy. We do not want our guests to be surprised by our presence. Most of our guests could care less about our presence and like interacting with us. In fact, we spend countless hours chatting with guests and many have become close friends through the years. But the younger ones want their privacy, so we just tell those that we cannot meet their expectations. Everything is spelled out on our website - but some simply do not read. Thus the need for the phone conversation. Frankly we prefer the older generations - they seem to appreciate it more. But we do get a lot of honeymooners and they love it - go figure...
You are right on the money about all those points, scottr. I don't get the unwillingness of people nowadays to use the phone at all. I know it is convenient when you want to inform someone of something briefly and don't want to be entangled in a possible lengthy phone conversation, but it seems nowadays texting is used as a substitute for phone calls in about any any every situation. I think that leads to a more impersonal society in general and I'm glad I did not live this way as a kid growing up. Part of it is not just about convenience but about people not being comfortable having to think of a response on the spot. With text or voice mail they can simply say what they want when they want and not be challenged for a follow-up. However, you can never be sure someone got your text or voice message if it is urgent. I can't count how many times someone said they haven't checked their messages yet or swear they left a message I never got (or I left one they never got).
What's funny to me is that if texting came around before telephones people would be heralding the major technological breakthrough of voice communication without having to type everything out and then wait (sometimes a long time) for a response.
haha - you could be right. About a year ago, we had a guest show up a day early and enter our cabin with the code we had provided in email the day before. SInce then, we ask for a cell phone # and we text the code to them, asking for an acknowledgement that they received it. I was a little concerend about guest pushback, but so far, none. We send the code about an hour before their scheduled check-in, and generally get an immediate "got it" response. If they can't get in for some reason, then we get a phone call, and walk them through the process.