Your guest’s stay at your rental has ended, and you’re busy preparing your home for its next occupant.
Then you receive a notification.
You’re being told a recent payment has been reversed. You check your bank account and sure enough, money that had been deposited has vanished into thin air. A penalty charge from your payment processor just adds insult to injury – what did you do? Why are you being penalized?
It’s a panic moment. Once money is yours, it’s yours, isn’t it? How can this happen? Who do you call? How do you get your money back?
What’s happening is called a “chargeback.” Anyone who uses a credit card to make a purchase can request to reverse the charge if they provide sufficient reason. You can do it yourself if you make credit card purchases.
While chargebacks are a normal part of doing business, getting one as a vacation rental owner can trigger a visceral response because it feels far more personal to lose money from your own private account. Business transactions feel separate; vacation rental income is yours, and losing it feels personal.
That feeling can make it hard to handle chargebacks with a clear head. Not to worry: we’re breaking down everything you need to know about how chargebacks happen, what you need to do to contest them, and how you can avoid them in the future.
Chargebacks can be requested for a handful of reasons – and guests will sometimes claim that one of the following has occurred when you know that it didn’t. Not to worry! We’ll get to what you can do about false claims in just a moment, but let’s talk first about the common reasons guests to your vacation rental will request payment reversals.
People tend to request chargebacks if they feel they did not get what they signed up for – even if the changes they encounter are improvements. If amenities that were promised were not available, the property was not cleaned before arrival, or the property has altered from its appearance in your listing photos, guests can put in a request for a chargeback on the basis that they did not receive the product they purchased.
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 they did not receive the product they purchased – a stay in your rental for the requested number of days.
You may see a chargeback for the full amount of the stay if you have previously disputed with the guest about refunding a portion of their nights. A guest cannot request a partial chargeback, so even if all they wanted was a single night’s refund, they will request a chargeback against the full booking amount.
Fraud is one of the most difficult claims to refute, and can be the most surprising to you as an owner. The guest’s stay went great, so there was no reason for you to look for problems with the payment.
However, the person staying in your rental may not have been the person whose card was charged. In these cases, the cardholder can ask for a chargeback, and since that cardholder did not agree to the charge, the request will likely be upheld. It’s usually pointless to dispute these types of chargebacks – fraud cases are almost invariably settled in favor of the cardholder.
The exception? Occasionally a cardholder will attempt to claim the use of their card was fraudulent when they did, in fact, make the purchase. We’ll talk about how to avoid such cases in the section on how to avoid chargebacks.
Paying with a credit card involves three entities: the credit card processor (such as Vacation Rent Payment or Square), the bank (such as Wells Fargo or Chase), and the credit card company (such as Visa, Mastercard, or American Express).
When a guest requests a chargeback, the cardholder’s issuing bank decides whether the request is valid and if a payment reversal will be issued, but your credit card processor acts as a liaison between you, the cardholder, and the bank. You will be working directly with your credit card processor to dispute the chargeback.
The first step for a guest requesting a chargeback will be contacting their bank and making a request to reverse the charge. The bank will notify the processor that the request has been made, and the processor will then remove the funds from your account and hold them until the bank determines whether or not the chargeback is valid.
While the funds are being held, you can submit information through your credit card processor that supports your dispute of the chargeback. The credit card processor will present that information to the cardholder’s bank to show that the charge was valid and that the funds should be returned to your account.
If the bank finds in your favor, the funds being held will be returned to you. If the bank finds in the cardholder’s favor, the funds will be returned to them. However, both you and the cardholder have the option to escalate the dispute further if you feel it necessary – though it’s costly for whomever loses the dispute.
You or the cardholder may escalate the dispute to the credit issuer (i.e. Visa, Mastercard, American Express). You’ll then go through the same basic process: you’ll provide evidence to support your story, and so will the cardholder. The credit issuer will make the ultimate determination, and the losing party will be fined at least $250 for the credit card company’s trouble. It’s up to you whether that potential loss is worthwhile.
To refute a chargeback claim, you’ll need to make sure you’re armed with information.
First, you’ll need to provide evidence that contradicts the claims of your renter. You can petition your credit card processor to provide the reason for the chargeback, which should give you a starting point for the type of evidence you’ll need.
A stay that was allegedly cut short can be disproved if you provide proof of occupancy, either in the form of correspondence during their stay or records of their arrival and departure. If the claim centers around the property not being as-advertised, show the processor timestamped photographs proving that the listing’s images and description accurately describe the property. For maintenance-related or livability claims, you can provide documentation of the amenity’s functionality and any work completed.
Regardless of the claim’s nature, information and documentation are your best weapons for ensuring you don’t lose income wrongfully. Keeping detailed records as a matter of habit is a good practice for any vacation rental business, but you should also immediately respond to a chargeback by collecting any evidence available as quickly as you can.
Chargebacks can take anywhere from 6 weeks to 3 months to resolve, so we’re sure you’d rather avoid the issue in the first place. As an owner, what steps can you take to protect yourself against receiving more chargebacks in the future?
If your guest made an accusation about your property not being as advertised, take a hard look at your property to see if they might have a point. Do your photos need updating to reflect recent changes? Are there any amenities that need updating? Should you have a more regular maintenance schedule for your vacation rental to ensure your amenities don’t break down during a stay?
Get ahead of any disagreement about your property being as advertised with great photos that accurately reflect your property currently, regular maintenance, and a reliable cleaning service you know you can always count on to do their best work.
An ounce of prevention is worth a pound of cure. If a guest was unable to stay in your property and requests a refund, be sure to engage good issue resolution strategies. You’ll help your guest feel satisfied with the refund they received for being unable to stay, and you’ll avoid the potential for the guest to feel they have no recourse 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 good guest vetting. But not to worry – those guests are few and far between.
To ensure your rental is guarded against fraudulent rentals, you’ll need to take some preemptive steps to verify the person you’re dealing with is who they say they are. Making sure the name on the reservation matches the name on the card is a great place to start, as it allows you to be reasonably certain that a stolen card isn’t paying for your guest’s stay.
You can also consider the party size relative to your rental capacity. A two-person party in an eight-person rental could be a red flag, and contacting your guest to do some additional vetting will help you determine whether or not it should be a point of concern.
While chargebacks can be tough, they are a normal part of doing business for any industry that accepts credit cards. Remember that though your vacation rental feels very personal to you, it is considered a business by your guests – and will occasionally run into common business hurdles like chargebacks.
If you haven’t encountered a chargeback yet, great! But it’s a good idea to be prepared for the possibility so, if and when one comes your way, you’re armed with the knowledge of why the reversal might be occurring and what you can do to protect your income.
With the right support, these difficult parts of vacation rental ownership can feel a lot easier. And that’s exactly what we do at Evolve: handle daily tasks, get your listing seen and booked, coordinate booking details, and more. Find out how we can make your life — and business — better every step of the way.