Chargebacks occur when a guest disputes a transaction with their bank or credit card company, and the funds are returned to the guest. As a vacation rental business owner, chargebacks can be frustrating and time-consuming, but there are some steps you can take to handle them effectively.
Chargeback Types and Statistics
Higher-risk industries, such as travel and hospitality, have seen a notable increase in chargebacks in recent years. Chargebacks can occur for a number of reasons. While stolen credit card fraud can account for about 30% of chargebacks, guests find filing chargebacks more convenient than initiating a refund.
Friendly fraud (not actually fraud) accounts for 75% of all chargeback cases when a customer disputes a legitimate charge they made on their credit card, debit card, or another payment method. Unlike traditional fraud, in which the perpetrator is typically an unknown third party, in friendly fraud, the customer initiates the transaction but later claims that the charge was fraudulent or unauthorized. There are several reasons why friendly fraud occurs.- Guests may forget about a booking they made or fail to recognize a charge on their credit card statement. In these cases, the customer may dispute the charge, even though they made the initial booking themselves.
- Guests may misunderstand the terms and conditions of a reservation or not understand the cancellation policy. This can lead to disputes and chargebacks.
- Sometimes, friendly fraud occurs when a customer’s credit card or account information is stolen or used without their permission. In these cases, the customer may dispute the charge as fraudulent instead of contacting their credit card company about the stolen card.
- Impulse buying can also lead to friendly fraud. Guests may book a vacation rental on a whim and later regret or change their minds about it.
Manage a Chargeback
- Read our How to Handle a Vacation Rental Chargeback vacation rental guide.
- Chargeback transactions must be adjusted manually in the disputed booking by OwnerRez users.
- Understand the reason for the chargeback: The first step in handling a chargeback is to understand why the guest initiated the dispute. You should review the chargeback documentation provided by your payment processor or bank, which will explain the reason for the chargeback.
- Gather evidence: Once you understand the reason for the chargeback, gather any evidence that supports your case. This could include booking transactions, renter agreements, communication with the guest and any other documentation.
- Respond promptly: It's important to respond promptly to chargebacks to increase your chances of winning the dispute. Most payment processors and banks have a specific timeframe for responding to chargebacks, so make sure you meet the deadline.
- Dispute the chargeback: If you believe the chargeback is unjustified, you can dispute it with your payment processor or bank. You will need to provide the evidence you have gathered to support your case.
- Review your vacation rental business practices: Chargebacks may be an indication that there are issues with your business practices, such as poor guest service or unclear refund policies. Use chargebacks as an opportunity to identify areas where you can improve and prevent future disputes.
- Consider choosing a payment processor that offers chargeback support.