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Thanks for sharing all this great information and research on a confusing topic.
From the link you provided (http://www.merchantcouncil.org/merchant-account/operation/pass-fee-customer.php), this is the approach I’d recommend:
“In order to charge customers for credit card processing fees you must create a dual pricing model. To accomplish this, raise all prices to offset processing fees and then offer a discount on cash purchases that's equal to the price increase.
The catch is that the cash price must be presented as a discount to the true price. This means that price tags, signage and advertisements must display the higher (credit card) price first and then display the lower (cash discount) price as a discount. For example, many gas stations offer a cash discount but they post the higher (credit card) price on their roadside signage.”
The price increase approach might work for some of you, and as mentioned above, the 2.5% credit card processing rates offered by ReservationManager make accepting credit cards less expensive than traditional options, and if that’s still too expensive, don’t forget the new 1% eCheck product!
Director, Product Marketing
ReservationManager / eCommerce
I'm curious about how and at what stage in the process you advise potential renters about Payment in full if using a credit card vs. installments with a check. Please advise.
Also, and this is to everyone, do you charge an additional fee for international credit card transactions? I just completed my first int'l cc transaction and was hit with an additional $15 fee for the pleasure of doing so. Do you include this into the booking fee?
We don't have that rule anymore (mainly because the Reservation Manager system doesn't allow us to differentiate things this way), but when we had it, it worked great. We advertised it up front. In the Rates section of our listing, we had a line, something like "Full Payment due up front for credit cards. Installment plan available if paying by PayPal or personal check."
This worked great ... almost NOBODY paid with credit card when they found out they could pay in installments using some other method. We were not upcharging as everyone paid the same price. Therefore, we were totally kosher, according to the credit card company's rules, because they don't have a rule about this. But we got what we wanted ... i.e., very few credit card transactions and therefore very little money spent on credit card fees.
(The people who did pay with credit card were the last minute bookings; in that case, we didn't mind the credit card fee at all because the apartment would have otherwise been unoccupied and not generated any revenue.)
Another thing was we had a $50 cancellation fee written into the rules (this was to cover the credit card fees for processing the cancellation), but over the phone, we told them that if they paid with personal check, we'd waive that fee. There's also no rule against charging an extra cancellation fee for people who pay with credit card. We could have advertised that the fee would be waived for non-credit card transactions, but we didn't want to muck up the listing with all these extra "ifs" and "ands."
BTW, PayPal was the "free way" for people to send us money internationally (except for some countries such as Germany which did not allow the free transaction). But now we are not even advertising that we accept PayPal, due to concerns (based on what members have posted in these forums) that PayPal automatically sides with the renter and will take our income away if there is a dispute. So we are no longer accepting PayPal for anything other than the security deposit (as a last resort, as we have other preferable ways for people to pay the security deposit, too).
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!
I have been trying to remember to call during the week re: the paying online option. I just have a question about the street address requirement vs. the P.O. Box. We live in a very rural area, and use our P.O. Box for EVERYTHING. I don't understand the street address requirement - our rental house has a street address, but our primary mailing address is our P.O. Box. Clarification?
You can have them pay the fee for your booking/security deposits as those are refunded to them and the fee will be too. For the actual rental fee, you can allow them to mail a check when it is due (as there is usually time unless booking last-minute). If they still prefer the convenience of a credit card it is their choice, but let them know a fee is involved. You can place this info in your listing for the types of payment you accept and on your contract too.
I am new to renting and just started accepting booking/security deposits via Paypal - my property is in Ireland - paypal fees are over 4% eg. €100 deposit - Paypal fee €4.25 - I have not passed on this fee to renters so far. If I pass on the fees how will those be refunded to renters. I have accepted deposits via Electronic Bank Transfer but fees were just too costly from US to Europe. The Reservation Manager Payment option is not available to owners outside of US.
Thank you for your time.
I do not know the exact fees in Euro, but international fees in USD is 3.9% + 30¢. I add that on using a special formula before charging them. If you tell me what the fees are for you in Euro I can help you with the formula. Please note you cannot simply take the amount you wish to collect and then add 3.9% to that + the 30¢ or whatever it is; it will not come out correctly.
The security deposit should be completely separate from your rental amount that is paid later. Thefore, unless there are damages or other fees you need to withhold upon checkout, you will refund the entire amount. In that case, when you reverse the transaction on PayPal using the REFUND button on the original transaction, the fee will automatically be refunded to them as well. Since the rental amount you collect later is not refunded however, you can choose to have them mail a check or pay in some other way, otherwise explain that there will be a fee if they still choose to pay by credit card via PayPal and let them decide. As long as you give them a choice there should be no issue. Hope this helps!
Thank you for reply.
The Paypal fees in Euro are 3.9% + 0.35 cents.
I have been accepting booking/security deposit as part payment of rental amount paid later ie. balance due on arrival - has worked out fine so far . I have not included a damage deposit as yet - perhaps something I may have to consider.
Mailing personal cheques from US can take time & also bank clearance may take 21 days or more so Paypal is the better option for me right now.
Hopefully VRBO Reservation Manager Payment option will become available to non US owners.
Again thank you for your help and advice - much appreciated .
I would truly reconsider not taking a security deposit. It is a deposit for damage, holding dates (reservation), cancellation and even for wittholding for other fees such as upgraded services (premium cable, Internet, long-distance or whatever you may charge extra for) or even the cleaning fee. In either case however, you can use the following formula:
y = (x + .35)
Just out of curiosity, how will the HomeAway Reservation Manager prevent you from having to collect a fee? They charge a fee just like PayPal does. I don't know of any other payment services (including PPI, SquareUp.com, Venmo, Cimbal, etc.) that don't charge a per transaction fee. Are you assuming there won't be one in an international version of HomeAway Reservation Manager?
Deposit I receive is non refundable & is for holding reservation dates/cancellation etc.
Thanks for formula re fees.
Of course I understand Home Away Reservation Manager charge transaction fees like Paypal - the problem is non US resident owners who do not have a US Bank account cannot avail of payment via Reservation Manager.
I'm confused. So then you have no safeguard or insurance should they leave the place in poor condition or damage, break, lose or steal anything?? Or, do you just keep their credit card number on file then charge them if there are damages? The problem with that is that with PayPal you don't take or know the actual credit card number (they enter it themselves via the invoice), unless you are using the expensive virtual terminal with monthly fee of course. That kind of blind trust of strangers is definitely not an option for us (or most homeowners) to be honest. Oh, and another thing: If you book several months or a year in advance as we often do you have to remember PayPal only allows refund of the fee within 60 days. Therefore, if you collect the rental (separate from the deposit) later, closer to the check-in date (in our case it is 2 weeks before) they can still pay by cash upon check-in and have it all refunded to their card (including fee) that same day. So you have an option which means they can avoid the fee even if they can't pay by check internationally AND you still don't lose any money either!
Also, I'm confused about the Reservaton Manager system. You said, "Hopefully VRBO Reservation Manager Payment option will become available to non US owners." Even if and when it does, there will still be a fee. And as I said earlier, you can charge the fee on the rental if they have no other way of paying or if a check is not practical as you say then refund it to them upon arrival if they pay in cash. It takes one second to press a button and have all the rental + fee they paid go directly back to their card instantly if they present cash upon check-in. I guess I'm trying to understand what it is you're trying to accomplish or solve or how that will help.
Following your advice and having read other postings on this topic I now request a damage/security deposit on initial payment. While I have been lucky so far with no damage problems I have to agree with you - blind trust of starngers is foolish on my part.
The reason I would like to avail of HA Reservation Manager is the fees are 2.5% which is less than Paypal 3.9%+.35 cents euro.
Oh okay, thanks for explaining. That is what I couldn't understand. However, rest assured. The international rates are almost always a percentage point more than domestic. I haven't checked but doesn't Reservation Manager charge more for international? Every other place I've seen does.
It's good you're now collecting a deposit but don't just think of it as a "damage" deposit. It is also your booking fee to hold the dates and cancellation insurance in case they cancel last minute. It is one fee that serves multiple purposes, but always stays sepearate from the rental amount and in most cases is returned in full, although we do allow guests to choose to have the cleaning fee and any upgrades they order withheld from that deposit when they check out if they wish, instead of paying up front with their rental fee.
Has worked like a charm for us for 7 years now!
Thanks again for your help and advice. Just one more question. You mentioned some renters pay you by cheque - is this a personal cheque drawn from their bank account or a Bank Draft meaning if I need to pay you $400 US ( from Europe ) I go to my bank and ask for a Draft for that amount in US dollars - this cheque is fail safe and guaranteed - I think you call it a Cashiers Check if I'm not mistaken. This may also be an option for me for advance bookings of several months or more. Thanks.
Yes, usually if they are over $1000.00 or so they are referred to as Cashier's Checks (from the bank). Money orders are usually those purchased from local merchants or Western Union for amounts less than that. While either are technically more sound than a personal or business check, we accept all because the deadline is two weeks before check-in which is ample time to see if it clears. Besides, few tenants are going to intentionally write a bad check so that they have no place to stay at the last minute (and lose their security deposit to boot).
My property is in France, and I only accept payments via direct bank transfer. This is not a cashier's cheque, but an encrypted transfer sent via secure computers directly from the guests' bank to mine here in France. There is a simple form to fill out, takes 5 minutes, your local bank branch can do this for you. The transfer usually registers within 48 hours, and the sender pays a small fee - in my case it's usually 40 dollars. I return their damage deposits in the same way (within 14 days), so we come out even on the transaction fee, and I have built it into my rental fees. If you have international guests, they will be quite familiar with the system.
Depends on the rental fee, depends on the sliding scale used by the many different issuing banks - some "rewards cards" charge higher rates, some rates change from time-to-time. I chose not to have to deal with the middle man, so to speak. As I said, my clients pay for the transfers, and I build my transfer charge into the rental fee I charge my clients, so my cost is zero. I am at the bank often enough anyway, so it justifies my time.
I just think it is a good idea for someone looking for options to realize that there are many other ways of doing business, and that they are being wise to ask around. Each will choose what suits them the best.
This is my second year as acting as my own property manager. I accept Paypal, personal checks and credit cards. Within the past 2 months, I have joined HomeAway and have used their Damage Protection policy and have waived the typical Damage Deposit I collected upfront. I use Paypal to create invoices and to handle credit cards so I don't use the Reservation Manager feature (just haven't had time to play with it). I am happy with the bookings I am getting but like most VHO's, I would like more business so I read these chats for additional advice.
But on this topic, I guess I have not gotten savvy enough to start charging credit card fees because I think what I am getting for my vacation rental is sufficient. Maybe if I graduate up to the big leagues and have several homes I rent out, this will make a difference. So am I the only one who is not charging for paypal or credit card fees? Should I be?
Preston, the point is that you decide how much you need or want for your rental and how much you are willing to accept. I guess you could just raise the price the amount of the fee but we find whole, round numbers make more sense and therefore choose not to advertise fees as part of the price. For instance, if our rate is $700/week during one rate period, we would find it odd to advertise it as $721.22 (the amount with fee), especially if they are paying by check in which case they only need to make it out for $700.00. I'm not sure what a better option is, unless you are willing to take less than what you advertise on each rental fee and security deposit (substantially less on longer rentals or peak season if paying by credit card). As our security is 25% (or minimum $250) that is what we need to collect and what is shown on their contract (again, keeping things simple with rounded, whole numbers). If they pay the $250 via credit card ($257.78 with fees), it still shows they paid $250 on the contract, the amount we actually receive. Their bank statement and PayPal receipt of course will still show $257.78, and when they get that amount refunded upon checkout they receive back the full $257.78.
Of course, we do indeed mention the fee for credit card payments on our listings and contracts and let them know the fee is refundable upon checkout and that for the rental fee they can choose to mail a check and avoid the fee all together OR they can pay the fee which we will refund them if they pay cash upon arrival. Hope this clears it all up!
As an Owner, I understand the desire to separate out various bank fees, cleaning fees, etc. for bookkeeping purposes. I also understand that this allows you to advertise your property at a more attractive rate (round numbers, slightly lower prices).
As a Renter, I hate having all these "bits and pieces" to consider. In addition, it seems misleading to advertise a property for "X", when you end up paying "Y".
However, I have recently decided to list a separate Cleaning Fee. Normally, I absorb these costs in the Rental Fee, but this year has been particularly expensive. I do charge a Damage Deposit, but would use this only for significant loss of property.
We actually don't advertise one price then charge another. In fact, our guests almost always pay what is advertised. The security deposit that they get back includes the fee refunded, and most pay the rental by check as they have plenty of time to mail it, and two weeks advance is plenty of time for it to clear the bank. As I said, we will even give them a full refund with fee if they choose to pay in advance with credit card then decide to pay cash upon arrival. So again, they don't pay more than listed (other than the cleaning fee which is customary on most rentals I have ever seen and goes directly to housekeeping). We even include all taxes. At rates as low as $400/week (or less at $1,200/month) during our off season for a very nice 2 bed/2 bath condo in a resort community with all amenities I'd say they are getting a great deal. We don't even make money in our off season (just hope to break even -- if we're lucky).
Include the following after providing a detailed rate quote:
Above quote is the amount recipient should receive after bank and transmittal fees if any.
Include the following as choices for making payment. (Note: am in Canada, so just make appropriate changes where warranted (country and currency)).
Since my last post over a year ago we have started using Reservation Manager for transactions with the customer, while we still use PayPal for overall account management and transfers. The fee is slightly less but our policy is the same as I described above.
Sending money free through PayPal.
A lot of would be renters and owners alike are not aware, one can send money through PayPal without incurring a fee for sender and recipient alike when:  it is funded with a PayPal balance or linked bank account, and  sender selects "I'm sending money to family or friends". Here is how I explain it to prospective renters about the choice I give them with regards to chooing [a] Credit Card, or [b] PayPal.
Credit Card through PayPal. Please note, a 2.9% plus $0.30 fee will be added to the cost of your stay for U.S. and Canada. I’ll send you an Email Invoice with a link to allow you to pay securely online using a credit card, and you don’t need a PayPal account for this. Requires full payment 45 days prior to arrival. (For other countries outside U.S. and Canada, we don’t normally offer this payment option because we can’t be sure what PayPal’s fee might be. But do let us know if you still want to use this method and we’ll see how we can accommodate.)
Tips to Owners:
1. I use a PayPal Calculator at http://www.gregledet.net/ppfcm.html or http://web.archive.org/web/20110114160357/http://www.rolbe.com/ppcalc.htm in determing what to charge them [a].
2. For option [b] to work, you must provide your renter your PayPal account that was created for Personal Use (not Business).
Message was edited by: tfv
Message was edited by: tfv on May 5, 2013 for educational and sharing purposes.
Yes, I saw that in your previous post already. While it's true it's a way for them to pay without either of you incurring a fee, the downside is you then have to convince anyone who doesn't already HAVE a PayPal account to set one up and link a bank account (which can take a few days to verify) just to pay you. If they already have one that is fine, but otherwise good luck getting people to go through all that for a one-time transaction (especially seniors who are often both technophobic and suspicious of Internet payments).
However, at least you give them both options so that makes it fair. They can choose the lesser of two evils in that case.
Clarification: I don’t even make an initial or extra effort to convince them other than my description. There is no need for that. However, the way I describe it serves to inform in case they are not aware and it will serve them well if they are willing to make that effort to create a PayPal account. I’ve even laid out the procedure for it so they can easily find it. And if they ask me further question “how to”, I can even send them a step by step procedure with screen shot on how to do it (for their specific country). If they are not willing, then at least they were fully informed and I’ve proactively deflected any resistance for them to pay the fees. They can’t complain anymore. If they choose to use the credit card option, it is true that they don’t have to create a PayPal account but only at the beginning, and cannot escape creating one by the time I refund their security deposit, because I send it back using the same method they used in making payment, and for them to be able to transfer the funds to a bank account, it needs a PayPal account.
(Sorry, I reposted the process but simply because it was an improved version, and a public service to fellow owners, besides it is a fitting answer to the title of the thread. I am sure not many are aware.)
I have been using PayPal with customers for years. If they are not a PayPal member and pay you with a credit card, they do not have to then create one to receive the refund. It goes right back to their credit card. Who told you that?
actually, if you take payment more than 60 days prior to the refund date, the guest DOES have to create a PayPal account to receive the cash. In the process of revising my payment due dates, though not quite sure where I'll end up. My bank has told me it can take up to 5 weeks to clear a check payment, by the way.
Thank you for this discussion - most helpful.
If I'm correct, the courts are in the midst of ruling on "passing on CC fees to the Consumer".
My tax atty.'s adivce has been that I can offer a discount for those paying cash (i.e.) check. However it is not something I encourage, since banks can take up to 3 weeks to notify ME of a a bad check. Then I have to go through a whole other process, and charge the renter bank fees, etc.
Debj, I don't think there are any laws (at least in most states) that say you can't pass the credit card fees onto the customer. Arco-AM/PM charges an extra fee on debit cards and I've seen many business that do charge extra. Of course, if you want $250 you can just advertise the rate as $256.41 for example, but that's like advertising tax in the price of an item. No one does that. If you give the customer a choice then they are never forced to pay for a fee. If they want the convenience of a credit card they can choose to pay it however. No one is forced to pay that way, and they can recoup the fee in many ways too.
MauiOceanView, that is why (although we still use PayPal for overall banking and business fund management) we now use Reservation Manager for direct customer payments and refunds. They allow refunds at anytime straight back to their card with no time limit and the credit card rates are cheaper as well. Even most Canadian credit cards are charged at the domestic rate, so they are much cheaper.
yes, I know. We have 4 condos on VRBO, I use Reservation Manager for one of them (enjoying their lower rates), but as I can only link one bank account and don't want to co-mingle funds (for liability reasons), I use PayPal for the other three. sigh. I'd love it if VRBO could find a way around this.
Oh okay... I'm not sure what you mean exactly by "liability reasons". Reservation Manager is set up to be used for multiple properties because each account of an owner or property manager is set up to handle multiple properties. Obviously then, that means they expect you to use one business bank account for at least all transactions relating to the same business (vacation rentals). I don't know too many who have multiple properties and a separate bank account for each one. I'm interested to know why that doesn't work for you.
Swin, I just spent time with my CC processing company trying to clarify this matter. Here is what I discovered:
My 2.2% CC processing fee is my best option. I do a telephone verification (Swipe card fees don't work in my case). Once I receive a verification code that amount is as good as money in my bank acct- thought it can take up to 3 days to show up in my bank acct. - That's a Bank driven matter. BUT the sale is good.
I can utilize an Echeck process, but there are additional fees involved. The check MAY appear to clear, howver EChecks are not regulated by the same rules as CC's, at this time. (Pretty much the same as depositing a hard check into my account). Issuing CHECK bank cannot guarantee funds, for up to 5 business days.
So, I'm curious as to how PayPal circumvents this latter situation.
Debj, everything you said is correct but I thought the discussion was about passing the credit card fees along to customers. What do you mean about PayPal circumventing the situation. What specifically are you referring to? I may be confused.
Swin, I think I'm correct that passing on CC fees is still in the courts. My questions is how Paypal's payment system is different ( as far as gauranteeing that the payment by check is good),
I never said PayPal's system was different. E-checks on PayPal work basically the same way as they do with Reservation Manager and elsewhere. Who are you referring to that said something about PayPal's system being different? I don't recall saying that at least.