11 Replies Latest reply: Jun 13, 2012 8:16 PM by anja RSS

    Cancellation, late payments- tis the season

    Senior Contributor

      I've been following several threads in our forums about the dreaded problems of late payments and cancellations, and thought I'd share a policy I enacted this past season. It's had an impact, since I've not had a late payment, and am now receiving completed applications and payment in record time. You might want to try it or tweak it to your own contract negotiations.


      Reservation payments:

      My initial email response to all inquiries (in template form)  states IN BOLD that no reservation is confimed until all monies due (either our 50% deposit required if reservation is made more than 30 days before date of arrival, or payment in full if less than 30 days) have been received and have cleared, and that all completed paper work has been received.



      Once a payment has cleared I email an invoice and include (again) the Cancellation page of our contract. 


      Final Payments:

      Most of my bookings are made weeks, if not months, ahead of time. We require 50% of the base rental rate to confirm, and the balance, including taxes, cleaning fee and Damage Deposit is due 30 days prior to date of arrival. Two weeks before final payment is due I email a reminder that I'll be billing their credit card on xx/xx/xx , and (again) send the Cancellation page of our contract. 


      Checks: I rarely accept checks (never for reservations made less than 3 weeks prior to date of arrival, since I found out the hard way it can take up to that long for a bounced check to, well actually "bounce" )


      Having templates set up makes the process very easy for me. And my guests always thank me for the reminder.


      Our Cancellation Policy has a tiered refund system with a minimum $100.00 cancellation fee, and NO Refund if a cancellation is made less than 30 days prior to date of arrival. (They can rebook within one year, if dates are available, but they still forfeit the $100.00).

      Happy renting!


        • Re: Cancellation, late payments- tis the season
          Active Contributor

          Hi Debj:


          Your process is absolutely correct. Thank you for sharing it with the community.


          I would add to all homeowners to analyze the security of several payment methods:

          • WIRE:   Typically used by foreign travelers to send money, as well as companies. Funds are transferred immediately and are available within an hour by your bank. Fee to sender: $25 within the US $35-$65 foreign. No fee to receive from US banks, fee may vary if funds come from foreign banks ($5-$25). Cannot be contested once funds have been sent.
          • ACH:   This is a direct payment from bank to bank, depending on the fee ($0 to $10), it takes one to three days to arrive, but the sender can send you a bank confirmation that the funds have been transferred. No fee to receive funds. Cannot be contested once funds have been sent.
          • Credit Card:   2.5% fee, immediate confirmation of payment, funds available next day. Can be contested by cardholder if service is not provided or not as advertised.
          • Western Union:  Popular by unbanked, high fee to sender (up to 10%) but recipient gets full payment NET. May have to go to local Western Union office to get the cash. Beware of scams requesting funds to be sent first or sent back.
          • PayPal:   Preferred by unbanked and some foreign buyers, 2.9% fee. Very secure to recipient.
          • Check:   Three days to have funds available in your account, but may take longer to realize that it bounced. Fraud may take a few months to get a charge back. No fee to recipient. Favorite method of some scammers requesting partial refund due to overpayment.


          Some banks may have different rates and may charge for foreign currency conversion. Check with your bank.


          I always prefer the first three options than the last three due to high fees, availability and chargebacks for fraud or bounced checks.




          Pochomil Beach

            • Re: Cancellation, late payments- tis the season
              New Member

              Hi Gabriel,


              I am new to this rental system and I have a question that you posted.


              If I am using the paypal system for people to pay for my rental, you said that there is a 2.9% fee.  Is that what is getting charged to me to receive the funds?  Or is that what the individual paying pays to use paypal?  Just curious on how I am supposed to get the money.  I was trying to get on the VRBO payment thing but they require you to be on the system for 6 months to qualify.  Have you used the email money transfer and what experience have you had with that?  I know for personal payments that the email money transfer works great and the rate to send is cheap only $1 for increments of $1000.  Thanks

                • Re: Cancellation, late payments- tis the season
                  carol Premier Contributor

                  When you use paypal, I believe you can pay the fee or your guest can pay the fee -- you negotiate that with the guest.  I'm not a regular paypal user, but one guest asked me to refund his deposit through paypal and offered to pay the fees.  When I entered the transaction into paypal, I was able to indicate who pays the fees. 

                  • Re: Cancellation, late payments- tis the season
                    Active Contributor

                    Regarding PayPal, there is a specific process to follow in order for either the Sender (Customer) or the Recipient (Merchant) ends up paying for the PayPal fee of 2.9% plus 30 cents.


                    When Merchant Creates an Invoice, payment of fee depends on how the Customer makes payment. It is free when the money comes from PayPal balance or bank account. However, this is a rare occurrence because for this to occur, there is a presumption that the Customer has an existing PayPal account & with a balance. If there is no sufficient balance, Customer can Add Funds (transfer money) from a linked bank account; however this takes 3-5 business days in the U.S. and 6-8 in Canada. If no existing bank account has been linked, adding one may take 3-5 business days, and then Customer can transfer funds. The likelihood for a "no fee" to occur is remote because it hinge on a lot of things to have occurred beforehand. In my 2 years of using PayPal, I can only count of one instance wherein the Customer already has an existing PayPal account and with sufficient balance to cover the cost, and volunteered to pay the PayPal Invoice from his existing balance without prompting. He could have opted to pay with his credit card and I would have ended up paying for the fee, but he didn’t. 


                    If the PayPal Invoice is paid by the Customer using a credit card, the fee is automatically deducted from the Recipient (Merchant); hence Merchant pays for the fee. In all likelihood, this is the most probable scenario because of least resistance (not contingent on many things as explained above).


                    Regarding Email Money Transfer (now called “Interac e-Transfer), this is only possible when Merchant and Customer have bank account at a participating Canadian bank and with online access. 

                    • Re: Cancellation, late payments- tis the season
                      Active Contributor

                      Hi Carol,


                      PayPal charges the fee to the seller (YOU) , and not the buyer. It has protection guarantee to the buyer to avoid scams and is trusted by many international buyers. It also adds $0.30 per transaction plus if funds are being transfered internationally the fee goes up from 2.9% to 3.9%. If your monthly volume is above $3,000 your fee drops to 2.5% or 2.2%. See https://cms.paypal.com/cgi-bin/marketingweb?cmd=_render-content&content_ID=merchant/merchant_fees


                      As you can see, their fees are on the high side when compared to the credit card merchant processing offered through VRBO/Homeaway of 2.5% but sometime is the only way to get paid from some international buyers. And they take the funds out of the seller's bank or credit card keeping that information confidentially from the seller.


                      Because of their protections offered to both the buyer and seller, they hold purchase amounts for a short amount of time, I think it is a week, and in chargebacks, just like credit cards, will review all your documentation so it is critical to keep your signed contract. See: https://cms.paypal.com/us/cgi-bin/?cmd=_render-content&content_ID=security/seller_protection_learn_more


                      I don't know what you refer to as email money transfers, I have a bank that does something to that effect, sends an email to the recepient who clicks on the link to go to my bank web site and specify their banking information to receive their funds via ACH (two or three day delivery). It is a free service from this bank, although other banks may charge $3 to $10 for that ACH.


                      I hope this was helpful.






                  • Re: Cancellation, late payments- tis the season
                    anja Senior Contributor

                    Hi msdebj,


                    Wow...my system is almost exact!    Amazing. From what and when I communicate ...tacking on my cancellation policy with my follow up....and right down to my "tiered refund" system...with the minimum $100 cancellation fee....the option to rebook.   My payment system differs in that I offer 4 ways to pay...and one method is by personal check but not if received less than 30 days in advance of arrival.


                    I have great success with my system, as well.  It's about keeping on top of them by providing them with timely follow up communications. Some travelers are just not organized....enough....they just don't keep a 'travel check list or travel task calendar' and they forget deadlines for payments...or they expect to get the "reminder" from us!  And, there are some travelers that "permit" themselves to either forget ..."permit" themselves to be late...or just "permit themselves to "do their own thing" !   I've stepped up my "follow up" with everyone after two instances of this  {and these occured in spite of my aforementioned  "system"}....


                    In 6 years, I have had two circumstances of very late balances ...one in which I just 'returned their personal check when it arrived 19 days before "check in" date.....and I requested balance paid by credit card  with a statement like:   "....so you do not lose your reservation."  They paid balance quickly by credit card.


                    The other couple had the nerve to try to check in with no balance payment made...{looong story}....they were already in my State for 3 weeks....I was on the verge  of  "cancelling " ...so I left them a voice mail to tell them.  I had to be away for the afternoon that day....came home to an email from them  stating something like.... "flight arrives in evening...late arrival at your place....need directions. ...leave the key under the mat...etc... and that they'd give me the check first thing next morning, ..."is that okay?"  Unbelievable.   I sent an email...AND... left a voice message...and got no replies to either.  My final message:   they are losing the cottage and forfeiting their 50% deposit.  Got a call back...within half hour .....they'd  been so busy diving, snorkeling, etc..!   They didn't have my directions to my place {'cause no one gets that until they are paid up}....so....I directed them to the nearest ATM so they can bring cash for the balance.

                    They turned out to be pleasant guests, actually.

                    • Re: Cancellation, late payments- tis the season
                      mike-dfv CommunityAmbassador

                      This is all good stuff. I do nearly the same. The basic difference is that I take the full amount in three payments: a $250 Booking Deposit, half the balance 60 days prior to arrival and the rest 30 days before arrival. None of the payments are refundable. This approximates the increasing difficulty in finding a replacement guest as the time draws closer. Technically, my contract states no refunds within 60 days but the final payment isn't due until 30 days, so that decreases the guest's risk. It seems like a good balance to me.



                        • Re: Cancellation, late payments- tis the season
                          amyg Active Contributor

                          I do almost the same system as Anja and MsDebj, but I do not allow rebooking into the future.  I don't like being so hard-nosed but for years I allowed people to rebook (after paying the cancellation fee of $50, which is now $100). The issue is that if they cancel you are still left with now unbooked dates and all you've collected is $100 for their cancellation.  If I can't rebook those dates, I'm out a lot more than $100.  And the money the guests have paid just moves forward to a future rebooking for them. 


                          I am now encouraging people to buy trip insurance to protect themselves in case they have an emergency and cannot take their trip.  I can no longer subsidize people's emergencies by letting them rebook at a later date.  It used to be pretty rare to have this sort of thing happen, but with 4 cabins if it happens even once or twice a year at each cabin, that can mean thousands of dollars in lost income. 


                          I've added a new line at the bottom of each quote that says "There are no refunds or rebookings if you cancel your reservation less than 30 days from your arrival date.  To protect your vacation investment, please purchase trip insurance."  There are also reminders and a link for trip insurance on all guest communications from the reservation system we use, iVacationonline.  I wish I didn't have to be so strict on this, but if I let my good naturedness run the business, we'd be losing money!

                            • Re: Cancellation, late payments- tis the season
                              New Member

                              Thanks so much, lots of information to gather and put in a contract and I know about people pondering and not knowing what they want better off just to move onto the next person for rent. 

                              • Re: Cancellation, late payments- tis the season
                                anja Senior Contributor

                                Amyg...yes...thank you for mentioning the trip insurance.  It's important.   I have always encouraged people to buy trip insurance when I sent out my offers....my "blurb"  appears after my price quote and after my accommodation "Cancellation Policy".


                                The locality sometimes dictates different types of emergencies for travel consideration.


                                I'm in an earthquake zone {five volcanoes here...all but one are active...I'm directly in between 2 of them}.  And, the island has tsumani risks.  Only official evacuation county directives affect "refunds" once on the island.   But, I do include something about "island hazards" in my offers because my specific location is in an area that is officially zoned "lowest risk" of lava flows and tsumani ....because one volcano near me is extinct...and the other one can "go off" at any time...but the lava flow would not reach my specific location ...gravity will prevail - lava doesn't flow UP.  The tsumani risk to homes is only for direct ocean front properties and the low lying nearby them....so all of that is relevant info. for my prospects to know about when considering trip insurance, what type and how much coverage they might want to have.


                                So, my "blurb" is general....


                                Insure Your Vacation

                                Travel Insurance protects your vacation investment. Two popular vacation insurance offers with low fees are included on our website  (LINKED) in the event that you should have to cancel your trip. Our guests have used them {we have not} so do your due diligence to examine “COMPANY NAME”   and   “COMPANY NAME” .



                                I started with my "option to rebook" for a future reservation a couple of years ago, only on a case-by-case basis.  So, it's not across the board for every cancellation...and I do not advertise this option.  I do not want to give the appearance of being too "easy" on cancellations.  The "future date" is one year out....not longer...and it's not transferrable {to family/friends}.  So, I do not state that option in my Cancellation Policy for prospects or booked guests to see. But, luckily I haven't had the opportunity to choose to use it, much.


                                All of my reservations are made months in advance {a visit to my location requires planning and budgeting for most people]...more than one flight is needed, usually.  Overall, I've been fortunate not to suffer from many cancellations.   On my reservation records, I have only three cancellations recorded...since 2004....the latest one was just this year, day before arrival.  One couple, who cancelled last year {parent death} ...I offered my 'future rebook option'  to... and they are now rebooked for this September {for a much longer stay....they extended from their original 7 nights to 12 nights}.


                                You are right, IMO. It would be too great a loss if that option is always offered when there are many cancellations.