How to prevent and manage guest chargebacks
Posted by admin on February 8, 2022 · Hosts,Operators
A guest has just checked out of one of your properties and you’re getting ready to turn it over for the next reservation.
Suddenly, you get a notification from your phone. You think: “Great! That guest who left 2 days ago must have left a review!”
Instead of being greeted by that warm feeling of pride that comes from a 5-star review, you find out that the guest has in fact requested a chargeback. Instead, the money for their booking is gone from your account and your bank is actually charging YOU a penalty charge.
Unfortunately, chargebacks are on the rise. Chargebacks911 estimates that they are increasing at a rate of 20% per year, and with businesses on average only winning 32% of chargeback disputes, vacation rental managers and hosts can’t afford to not have protective measures in place.
What is a chargeback?
A chargeback happens when a cardholder disputes a transaction, claiming that it resulted from fraud or abuse. The funds are then reclaimed from the merchant and returned to the cardholder’s account.
Anyone who uses a credit card to purchase anything online can request a chargeback, as they are designed to help customers feel secure and prevent fraud.
Chargebacks also go by another name: “friendly fraud”. Customers and criminals have taken advantage of the chargeback system, using it to steal from businesses by claiming legitimate purchases are fraudulent.
Why do guests request chargebacks?
A guest might request a chargeback for any number of reasons, both legitimate and fraudulent. Here are some of the most common reasons:
Disputes about the property
People usually request chargebacks if they feel they did not get exactly what they paid for.
If amenities that were promised were not available, the property was not cleaned before arrival, or the property was not represented accurately on a booking platform or your own direct booking website, then a guest might request for a chargeback on the basis that they did not receive the product they purchased.
Disputes about their length of stay
If a guest was unable to stay at the property altogether or had to leave early because of an issue with the property, they may request a chargeback because again they did not receive the product they purchased – i.e. a stay at your rental for the requested number of days.
Even if you agree to refund the guest for those unstayed nights, you may see a chargeback for the full amount of the stay. A chargeback will always relate to the full booking amount, with fraudulent guests looking to take even more money from you in this case.
Intentional and friendly fraud
Fraud is one of, if not the most difficult claim to refute, and will be the most surprising to you as an owner.
The person staying in your rental might not be the person whose card was charged. If the card is stolen, the cardholder will request a chargeback and because the card is stolen, the request will more often than not be upheld. It’s usually pointless to dispute these types of chargebacks – fraud cases are almost invariably settled in favour of the cardholder.
However, with friendly fraud a cardholder will attempt to claim the use of their card was fraudulent when they did, in fact, make the booking and completed the stay in the property.
How can I prevent chargebacks in the future?
Resolving a chargeback can take anywhere from 6 weeks to 3 months, so for obvious reasons, you want to avoid the issue in the first place entirely. So, as an owner, what steps can you take to protect yourself against chargebacks?
Prevent disputes about the property
If a guest claims that your property is not the same as the one you are advertising, then you might need to take a look at your property and listing to see if they have a valid point.
Do your photos need updating to reflect recent changes? Are there any amenities that need updating? Do you need a more regular maintenance schedule for your vacation rental to ensure your amenities don’t break down during a stay? These are all questions that you should maybe consider.
At SUPERHOG, our philosophy is that prevention is better than the cure. Get ahead of any disagreement about your property by listing it accurately, with high-quality photos that truly reflect your property, commit to regular maintenance checks, and hire a reliable cleaning service you know you can always count on to do their best work.
Fraudulent listings on the major booking platforms are also on the rise and something that owners need to be wary of. SUPERHOG allows owners to demonstrate their credibility and authenticity, by acting as an independent third party that verifies your property is real and proves to guests that you are trustworthy, and most importantly, that the property is legitimate.
Prevent disputes about the length of stay
If a guest was unable to stay at your property and requests a refund, be sure to have an issue resolution strategy, and make your cancellation policy and terms of service apparent from the start.
This will help your guest feel satisfied with any refund received for being unable to stay, and you’ll avoid the potential for the guest to feel they have no other option but a chargeback.
Guests who dispute the number of days they stayed without informing you, or who claimed they didn’t stay at the property at all when you know they did, aren’t situations you can avoid by any other means than having comprehensive guest screening.
SUPERHOG’s advanced guest screening integrates seamlessly into the pre/post-booking journey, giving owners and hosts the ability to verify their guests through a combination of ID verification and Biometric checks.
Enable 3D Secure for guest payments
One of the best preventative measures for chargebacks is the use of 3D Secure. 3D Secure provides an additional layer of protection that monitors card activity and determines if a transaction needs further authentication from the card owner before it can be completed.
For property managers who use a Payment Service Provider like Stripe or Worldpay, 3D secure links are incredibly easy to implement. For more information about the benefits of 3D secure, check out our blog on the importance of 3D secure payments for vacation rentals.
Prevent fraudulent chargebacks
Avoiding fraudulent chargebacks is complicated, but not impossible.
To protect your rentals, you’ll need to take some pre-emptive steps to verify the person you’re dealing with is who they say they are. SUPERHOG can automate this process for you and is integrated with the largest property management systems in the industry.
Learn more about SUPERHOG’s PMS integrations.
While chargebacks can be a real kick in the teeth, they are a normal part of doing business for any industry that accepts credit cards. Tackling chargebacks is one of the more difficult parts of vacation rental ownership, but what if you didn’t have to handle it all by yourself?
Our deposit/damage waiver solution uses 3D Secure to ensure that you’re protected from fraudulent chargeback requests and can cover any accidental damage that occurs during a guests stay.