Question About Accepting Credit Cards

chisueApril 8, 2010

We own a vacation rental condo on Maui. We advertise it on VRBO (Vacation Rentals By Owner). When I renewed our ad last week VRBO's receipt contained a link to Payment Processing, Inc., a means for us to arrange to accept credit cards from guests. They list HSBC, Chase, etc. on their literature.

We've had 80% occupancy for years accepting only checks and money orders, but I have no idea how many people look at our ad, see we don't accept CC's, and move on.

This company offers rates for small volume 'businesses' like ours. (About 30 transactions per year.) If half our guests continued to pay by check, we'd be paying the company no fee and 3.5% + 30 cents per transaction. If all our guests paid by CC's we'd be paying $5.00 per month and 3.1% + 30 cents.

I have no experience with this. I suppose we could offer to take CC's and charge the guest a fee that would cover our costs for doing it. (Or, to put it another way, offer a discount for cash.)

Are these standard and reasonable charges? How does the money move from the cardholder to the company to us when we enter a charge? (They provided a tutorial on accepting the info from the cardholder and submitting it to the company over the net.)

Where *else* would I turn for information if not to this forum! LOL

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CCard funds are deposited to a linked bank account. Direct-deposit kind of thing (ACH).

Far as I'm aware, card companies prohibit explicitly charging an extra fee ... but offering a discount for cash is perhaps a way around that.

Depending on the terms of your merchant agreement, there's typically a deposit for each closed (daily) batch of card transactions.

The "small" business where I work (ranges from 0 to ~100 card transactions per day), the merchant service charges a "discount" fee against the each daily batch deposit. Two bank transactions per batch -- a credit for the full amount of that day's card sales, and a separate debit for the discount. Note that the local bank charges a fee (account analysis) for each transaction on the account, so each closed credit card batch consists of TWO local bank transactions. Then there's an additional debit at the end of each monthly cycle, which consists of 1) a "batch header" fee for each batch of transactions, 2) a customer service fee ($9.50), and 3) an additional per-transaction card fee that varies in amount per the card type AND transaction type (card-swipe, manual entry, merchandise return, and probably a few other parameters). This is the 3rd merchant service we've used. One of the previous services deducted the card discounts as part of the deposit, so the deposit was not for the full amount of the day's card sales ... made for icky bookkeeping.

    Bookmark   April 8, 2010 at 9:38PM
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Dadoes -- Thank you. I *think* I get all that. I had wondered if there would be a fee when our bank receives the money transfer.

I'm resistant to the 'need' for accepting CC's. I don't understand what 'protection' guests think they have by using a CC. Maybe it's not about 'protection', but living on the float?

Whether by check or CC, the guest still has to pay 'up front', before occupying the condo. As long as the condo is as represented (1 BR 2 Bath Ocean View in "X" condo resort) no CC company is going to refund to the guest because he doesn't like the decor or the maid didn't fold the end of the toilet paper into a triagle. (We have never had ANY complaint from ANY guest and have 18 5-star guest comments in the ad.)

Guests can buy cheap trip insurance from VRBO and others that *would* protect them if they must cancel. We promise to refund any portion we can re-book if a guest cancels after making final payment (30 days before arrival).

The $500 damage deposit on our condo CAN be put on a CC when the guest registers at the front desk. (I do see the advantage of a CC for this. It needs to be disputable because some owners are unrealistic about what's normal wear and tear and what's *damage*.)

I know, "Perception is Truth". I'm not sure what perception I'm fighting -- or if it's a lost cause!

To see if I have this right:

A guest books a 7 night stay @ $130/night + taxes (13.42%). That's a total of $1032.12. He's arriving in three months.

He charges the $300 deposit. I send that in. The payment company deducts $10.50 and sends my account $289.50, or sends me $300 and charges my account $10.50 on this transaction.

Two months later I charge the guest's account for the balance due ($910 + taxes $122.12 = $1032.12 less $300 = $732.12). The payment company credits my account minus 3.5% or charges me $25.62. (I pay on both 'goods' and taxes?)

I see I've omitted the 30 cents per transaction. Wonder if there's another 30 cents on the credit to my bank.

I also realize that each guest booking generates TWO transactions, one for the deposit and one for the balance. My 30 guests per year are making 60 transactions.

Also -- Isn't it interesting how CC companies are trying to tap these teeny markets now that regulations have tightened for them?

    Bookmark   April 9, 2010 at 10:28AM
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Just thought I'd respond as a frequent user of VRBO. It's not an issue to me at all whether I pay by check or cc. I've done foreign transactions where the deposit was only wired funds. VRBO is still very much transactions between individuals, so I think checks are still expected. And if you're getting that kind of occupancy rate, why add unnecessary fees?

    Bookmark   April 9, 2010 at 10:44AM
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spacific -- Thanks for that. There was absolutely no concern about paying by check when we bought this place in 2001. Recently though, I have more people asking if they could use CC's, and I wonder how many others never contact us once they see we take checks. On the Trip Advisor forums posters frequently warn people to *protect* themselves by using a CC. (Hah! What protection?)

    Bookmark   April 9, 2010 at 2:58PM
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Look, you know that you are honest and that you have had happy tenants in the past. But for the customer shopping, he doesn't know that you're a good guy or that the reviews aren't all posted by your friends. So yes, the smart customer is going to use a credit card if he doesn't know you. That's my bottom line. Up your rent by ten bucks for everyone if you are worried about covering the fee.

    Bookmark   April 9, 2010 at 3:20PM
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sushipup -- Would you please tell me how you think using a CC 'protects' the guest? Or is that immaterial since he *believes* it does?

    Bookmark   April 9, 2010 at 3:58PM
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If you use a credit card,m you can dispute the charge and the bank will hold the charge pending investigation. If you pay by check/cash, then you are out your money unless you go to court.

If you are honest and above-board, you are just making your tenant feel more confident about the transaction. Consumer protection groups are repeatedly telling people to never use a debit card, only a credit card. It's becoming ingrained in the consumer. At some point, by not accepting credit cards, you may be telling potential clients that you are hiding something, or it's that perception.

    Bookmark   April 9, 2010 at 4:15PM
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From a completely different perspective......

Lots of travelers are charging their whole trip. It isn't that they don't like to write checks - they just have nothing in their checking account. There are tons of people taking vacations with borrowed money. Accepting credit cards will open you up to these clients - for good or for bad.

    Bookmark   April 9, 2010 at 4:47PM
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I wouldn't necessarily shun a place that only takes checks, but I use my credit card for everything. I might find that I'd rent the condo a few doors over if they do take the card.

No, I don't run up my bills. I pay it off in full every month. I just find it more convenient to use the credit card for this sort of transaction.

I do, however, pay my dentist by check. He offers a discount for me not using the card.

    Bookmark   April 9, 2010 at 5:01PM
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Thanks, all! Sushipup, there are no grounds for a dispute. Nobody's CC company will refund what they've already paid for the 'delivered as promised' property, whether they've rented from an owner, an agency, a realtor, whatever. This is a myth. HOWEVER, it seems that if the customer *bleieves* the myth, that's all that counts, right? I see your point.

Billl -- Yup, that's another thing I'd thought of, but I don't particularly WANT guests like that. (Frisk 'em on departure!)

Mary_c -- If we do start in on this CC process, I will offer a discount for people who 'put the check in the mail'. Good point.

One of the things with condos is that they are all different, even within one resort complex. Some are 'bare bones', one of a string of rentals, and some are an owner's personal vacation home and nicer. With VRBO the customer can see photos and ask questins of the owner to avoid the 'dogs'.

    Bookmark   April 9, 2010 at 6:53PM
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I write fewer than five checks per year and I find paying for anything with a credit card or money order to be positively antediluvian. I will do it if I have to, but with the payment options open to people these days, I don't get it.

Last summer I was arranging a vacation rental, and the property management company took credit cards, but gave a discount for checks. But they required that the check be sent weeks in advance. I offered to direct deposit money into their account so that I could get it in by the deadline, but they refused to accept it saying they were not set up to do so. You don't have to be set up to receive it - it just comes in.

And what about a PayPal option? I could have done it that way, but they weren't set up for that either.

    Bookmark   April 9, 2010 at 7:25PM
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Yes, it's all about what the customer believes. Also, a lot of people put everything on credit cards for the air miles or other benefits. And Billl, I think the era of charging everything because you can't pay for it is about over. Which is why all the tourist areas are suffering terribly in this economy. People are NOT spending money they don't have, not right now.

    Bookmark   April 9, 2010 at 7:25PM
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Thanks, all! Sushipup, there are no grounds for a dispute. Nobody's CC company will refund what they've already paid for the 'delivered as promised' property, whether they've rented from an owner, an agency, a realtor, whatever. This is a myth. HOWEVER, it seems that if the customer *bleieves* the myth, that's all that counts, right? I see your point.
What do you mean by this, they got their condo so they can't dispute it?

    Bookmark   April 10, 2010 at 11:48AM
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graywings -- Most rentals by owner, and many from agencies, require payment in full 30 days in advance of the guest's arrival (sometimes more). People can buy trip insurance from VRBO at a very low cost if they think they may need to cancel. It's often impossible possible for me, as an owner of a single property, to hope to re-book at short notice -- certainly not without the new guest demanding a discount.

cmarlin -- If the contract was fulfilled there are no grounds for dispute. The guest paid for a 1 BR 2 bath ocean view condo at "X" resort and that's what he got. Now, if the guest arrived and there was no condo or he was given something of lesser value, there would be cause for dispute. We've seen something similar with fly-by-night 'travel agents' who defraud people.

I post often on the Trip Advisor Hawaii forum. Once in a great while someone posts that a condo owner fradulently refused to refund a damage deposit. (This is one place I can understand wanting to use a CC, which our set-up allows.) There are also questions about, "How do I know the condo being advertised exists and is owned by the person I'm paying? How do I know if it's licensed as a rental? " (Easy to check out by calling the resort manager and/or the county.) One can also look at the date the condo was first advertised on VRBO. (In our case, 2001.)

When you rent through an agency or book a hotel, you book a 'category' of condo or room. If you don't get that category (no 'ocean view' even standing on the tiny balcony with a periscope), you have grounds for dispute. You won't 'see' the condo or room until you arrive. You are not booking a specific condo or room. (You ARE doing that when you rent from an owner.)

    Bookmark   April 10, 2010 at 12:19PM
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I have a question, is there a reason not to use Paypal instead? I don't know what the current fees are to receive money, but I used it often to "send money", ie, pay merchants.

I also dislike writing checks. The only thing I write checks for these days is dog shows and the occassional contractor that won't take a credit card.

    Bookmark   April 10, 2010 at 1:16PM
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So far it looks like almost everyone is willing to pay more for the convenience of using a CC. (It's not really about 'protection', which is good, since that's not the protection you need.) There may also be some psychological reason -- you're not *really* PAYING for it; you're CHARGING it! LOL

    Bookmark   April 10, 2010 at 6:33PM
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Truth is that there are many many reasons for using credit cards. We are fast becoming a cashless and checkless society. I wouldn't waste time determining the motives of the people who use credit cards, I'd just make sure that I got all the business that credit cards can potentially bring. It's foolish to not accept credit cards these days.

    Bookmark   April 10, 2010 at 7:01PM
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It looks like maybe you got your answer by the number of posts strongly advising accepting credit cards. My only other thought is that many people (some perhaps who responded here) would not rent through VRBO anyway because they're uncomfortable with dealing with one unknown person.

If you do decide to offer credit card processing, I expect that most people will use them (or debit cards) rather than checks because of the convenience, so I agree that it's worth it to include that additional cost into your rental fee and offer a cash/check discount.

    Bookmark   April 11, 2010 at 12:36PM
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I am Canadian. If I were to rent your condo in Hawaii I would be happier paying by credit card because of the hassle of writing a cheque on my Cdn. bank account that would have to be cleared by a bank in the U.S. that can handle such a transaction. Or I would have to buy a bank draft or money order (cost can be high)- and forget a funds transfer by wire. We are going to be staying in Europe in June at a small B & B that does not take credit cards. We are going to be staying there for 8 days after my husband's meeting - and I have spoken with the owner and told her where we will be for the 6 nights prior to our arrival. Normally she requires that people send over a bank draft or a travellers' cheque with one night's deposit - I have worked in a bank - scares the heck out of me with either - had to once trace a bank draft that went astray. I will be paying for our room with one AMEX travellers' cheque for the total amount of the room that I will give to her once we arrive - and will then pay for other costs in cash. We don't want to have to carry excess cash with us - and in Italy we found only one bank which had the PLUS symbol that we need to use our debit cards to withdraw cash. Also people watch you on the streets. I am very happy that she will take the travellers' cheque without me having to go to the bank. If I have to go to the bank I have to take my Cdn. passport (in high demand) - and in fact did have a problem with a thief a few years ago. Also, while you are reputable, some people are not and sending a cheque or money order could be worrisome - so if I had a choice between your condo and a similar one that took credit cards - I would go with the credit card.

    Bookmark   April 11, 2010 at 4:18PM
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cmarlin -- If the contract was fulfilled there are no grounds for dispute. The guest paid for a 1 BR 2 bath ocean view condo at "X" resort and that's what he got. Now, if the guest arrived and there was no condo or he was given something of lesser value, there would be cause for dispute. We've seen something similar with fly-by-night 'travel agents' who defraud people.

Well, yes. This is exactly the kind of thing that you get extra protection against by paying with a credit card. Even if you've been renting responsibly for ten years, and they can verify that, there's no guarantee to a total stranger that you aren't flirting with bankruptcy and foreclosure, and if something like that happened, they'd be highly unlikely to get their money back if they paid by check; it'll have been long spent before they know there's a problem. Not highly likely that would happen but certainly within the realm of possibility. And credit cards are definitely more convenient. otoh, if you have a high occupancy rate already, whatever extra effort/cost is involved may not be worth it to you.

    Bookmark   April 11, 2010 at 5:08PM
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See? Where *else* could I go to get all this excellent input? Mahalo (thanks) to you all. I guess I have to delve into the CC biz.

Eccentric -- I had no idea it was difficult for a Canadian to send a check or money order. About half our guests are Canadians, and no one has ever complained! Some send money orders and some send US dollars right on their own Canadian checking accounts. The couple leaving our condo today after five weeks are Canadian. They've just booked seven weeks for next spring. I'm going to have to ask them about this. Thanks for the information.

spacific -- Millions of people skip the middleman and rent direct from owners all the time. I like it because you can see the specific condo or home you'll be renting. DH and I have been assigned our share of 'dogs' when booking through vacation rental agencies. Every agency has them, and they have to rent them or loose the client. (Guess how I learned about the 'contract fulfilled' stuff?) We contract with an agency to look after our condo and our guests, but WE do 99% of the bookings direct. (You could rent our condo from the agency if we hadn't already booked the dates -- and you'd pay at least 20% more for the exact same product and services.)

    Bookmark   April 11, 2010 at 6:39PM
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If I were looking online for a condo to rent, I would absolutely give preferance to one who took PayPal. Is that an option? I prefer it for the double blind feature.

    Bookmark   April 11, 2010 at 8:05PM
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As you describe there are no grounds for a CC dispute, but the renter doesn't KNOW that until after arriving at the rental in the future.
If/when you offer cards many of your present renters will start using the card. It is up to you if it is worthwhile.
I used to advertise my rental in Mexico on VRBO, renters needed to mail their 50% deposit to my USA address. I was amazed how many people simply sent one email inquiring about the date, then mailed checks to me. There are lots of trusting people out there. One thing that I think helped me was a professional looking website.
Foreigners always wired money to me to avoid the foreign check hassle.
VRBO is still my first go to website for renting a house.

    Bookmark   April 11, 2010 at 10:41PM
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Thanks, all. I'll look into the PayPal option too!

I'd like to add something to this discussion. We've been talking about the guest's concerns, but let's not forget that the 'trust' goes two ways here. I'm entrusting a $700K property to people *I* don't know! The damage deposit is $500; it costs at least $100 to get a repairman to show up.

    Bookmark   April 12, 2010 at 11:50AM
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Of course you are at risk too, but that wasn't your question and I don't know how to take that piece off the table for you. We have a tenant who didn't report that the toilet was running 24/7. Now we have a $3,000 water bill and no recourse but to pay it. It was a $5 fix.

    Bookmark   April 12, 2010 at 12:40PM
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chisue - It may have become easier for Canadians but a few years ago it was a nightmare. That said (and I worked in a bank at one time) my boss in an M & A company used to just write U.S. $ on his Cdn. cheque and mail it off and it always cleared, but then I know that the Bank cleared it "by hand" - he was extremely well to do, which can make quite a difference as opposed to being a fee-paying middle class person. I remember before GardenWeb was taken over and I was going to join and pay the $15 US I think it was and the hoops I was going to have to go through - so I only looked at the "free" forums - wasn't worth buying a U.S. $ money order and paying the fee for that. Many Cdns. now have U.S. $ bank accounts so that might be helpful as well - we don't. And it used to be to get a U.S. $ credit card you had to have an address in the U.S. to have the statement delivered to. We are so similar yet when it comes to anything involving buying something ("shopping") we become international! Just ask any Cdn. ordering or trying to order something on-line from the U.S. - even if it is allowed, versus an American ordering from Canada. Big difference. By the way, I don't like PayPal - maybe because I almost signed up one day then changed my mind and even though it has been 5 years I keep getting e-mails regarding hacking into my account - spam of course - but rather alarming since I didn't even complete half of the application and of course did not submit it. It used to be that there was a bank in Wilmington, Delaware that could clear Cdn. cheques. When we were in NY last month I did see lots of TD Banks - we bank at TD in Toronto - but to do anything with my debit card I would have had to use the ATM machine - which thankfully had a PLUS sign - the way my day had been going I was expecting it not to. (I had just been trampled by a gaggle of teens who saw Jennifer Aniston and wanted to get to her.)

    Bookmark   April 12, 2010 at 6:06PM
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You can get notices that someone is hacking into accounts that you have never had at companies you have never heard of. It is nothing to do with Paypal just that many people to have a Paypal account so the spam is sent out so that the spamer will know that they have reached a live address if someone responds to the email. Never ever directly respond to an email about your account,actual or not, but rather sign out of your browser, sign back in and go to company website to check. Most will then ask you to forward the email to their fraud area.

If you do respond to one of these phishing emails you will be listed as a posibility to all the ugh sites on the internet.

    Bookmark   April 12, 2010 at 10:34PM
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To the original poster, you would have a lot less stress if you listed with a rental agency and let them handle any rentals. If you worry about damage or unsuitable people renting perhaps it is time to remove the unit from your list of worries by selling it. Although a condo on Maui would be nice to have, the stress of worrying about the what if's is not worth it.

    Bookmark   April 12, 2010 at 10:38PM
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maifleur -- We employ a vacation rental agency. They may book our condo twice a year, but they are on island to take care of any problems at the condo.

Actually the only times we've had damage, the guests were agency-booked. One party evidently partied so hearty that they broke a framed print over the sofa -- and replaced it with a cheapie. The other was *unbelieveable*: a man started a 'cooking' fire ON our kitchen countertop.

We've owned long-term rentals that were MUCH more of a problem to manage than the vacation rental. I'm not complaining. This thread has strayed from my OP about CC's.

I only brought up my concerns because of the idea that the guest has to 'trust' that the condo is as advertised (when paying by check). My side is that I have to 'trust' that they won't wreck the place.

liannasr -- Of course I had to peek! LOVE your bungalow and I can see why you have good occupancy rates. (Now YOU have to look at VRBO #8049. LOL)

Everyone -- I know I am out of date. I don't even want to *bank* online! I promise I will look further into PayPal and CC's.

    Bookmark   April 13, 2010 at 12:00PM
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I decided to update this. I did sign up to accept CC's. Only two guests have wanted to use CC's so far -- both Canadians. At least I know we aren't losing people who only consider properties that take CC's.

    Bookmark   May 9, 2011 at 11:11AM
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