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2019

Security Deposit Holds

The concept of a security deposit hold is pretty straightforward: you want to be able to get money from the guest to cover damages, but you don't actually want to take any money unless you have to - and most of the time, you won't.

If you have the guest's credit card number, it seems like it would be easy enough to just hit it with an extra charge. Unfortunately, destructive guests aren't stupid - they know how to cancel their card or block your charges before you know they've wrecked your place.

A security deposit hold provides a way around this problem.  You've probably heard of them at the gas station: the gas station will place a hold of several hundred dollars on your credit card before you start pumping the gas.  Then, when you're finished, they'll charge the correct amount, and release the rest of the hold.  Only the actual charge ever shows up on your credit card bill to be paid.

OwnerRez security deposit holds work the same way: Prior to guest arrival, a hold is placed against their credit card - not a charge, just a hold.  This hold will be kept active throughout the length of their stay, and for a few days afterwards to give you a chance to check for damages.  Assuming there's no damage, the hold will eventually be automatically released.  If there's damage, though, you can place a charge against the hold and have it honored - even if the card has been cancelled!

Our experience indicates that a security deposit hold is the best and most reliable way to protect yourself from guest damage, so we recommend that it be used if at all possible.

Configuring

Security deposits are configured in the Rules.

Each property has a Rules area, where you can configure the default settings for Security Deposits.

Each Booking also has a Rules tab.  This is automatically populated by whatever's set for the Property at the time the booking is created.  However, you can change it in the Booking, and only that Booking will be affected - not the Property as a whole.

The available settings are the same in both places:

Amount - the dollar amount of the security deposit hold that will be placed.  Note that this is not a charge against the guest's credit card, just a hold, which in most cases never appears on their statement, although it does count against their credit limit while active.  It is simply a guaranteed amount that you can charge against later no matter what.  It is completely separate from, and not related to, any Charges in the Booking.

Guest Reminder - The default choice is for an automatic reminder to be sent to the guest if no security deposit has been scheduled.  This normally occurs because the guest did not provide a credit card (such as, they chose to pay via check).

Even if a guest didn't provide a credit card, it's still good to leave the automatic reminder.  If they do provide a credit card for the security deposit, then you have it and are protected. If they can't, they'll usually reach out to you, and you can make some other arrangement.

Held - This is the number of days prior to guest arrival that the hold is placed.  The default is 1 day - that is, we place the hold the day before arrival.  It is not recommended to place the hold too early, because they expire automatically after a certain period of time.

When the booking is created and a credit card is provided, a security deposit hold will be automatically scheduled.  You can see this on the Booking, Transactions tab.

Released - This is the number of days after guest departure that the security deposit hold will be automatically released, if you've taken no other action before that time.  This should be as short as possible, while leaving enough time to confirm that there was no damage - we've found 5 days to work well.

Releasing

The security deposit hold will be automatically released at the number of days specified in the Released setting.  In most cases, you can just let OwnerRez take care of releasing your security deposits for you; you don't have to do it manually.

If you want to release a security deposit early, you can do it at any time by going to the Booking, Transactions tab, while the security deposit is active (after the hold has been placed.)  You'll see an entry for the Security Deposit:

Click on it to see the Security Deposit Hold detail screen:

You'll see the status of the deposit, and can manually release the deposit by clicking the "Release Now" button and following the instructions.

Charging Against

Normally, the entire security deposit should be released.  When there is damage, though, you may want to place a charge against the deposit for part or all of the value of the hold.

This is done in exactly the same way as Releasing the deposit, so follow the instructions given above.  When you click the "Release Now" button though, you get this screen:

The default setting is to release the entire amount.  But, you also have options to keep the entire amount, or to keep a specific amount and release the rest.

With either of these two options, what will actually happen is that a charge will be placed against the hold, and the hold itself released.  Since the hold was put in place earlier and confirmed by the bank, the charge will be automatically approved - it won't have to re-run the credit card, and will be valid even if the card has been cancelled or the credit limit has been reached.

The page also prompts you to send emails to the guest.  We recommend that you clearly specify your reasons for keeping the security deposit in your email, and to provide whatever evidence you have available (photos, receipts, etc.)  This will be important if the guest disputes your charge with their credit card company.  Even more importantly, if it looks like you have overwhelming evidence, the guest may not bother disputing it with their credit card company, which you'd really prefer they didn't do.

Common Questions

The guest is complaining that I haven't released the hold.  But I did!

OwnerRez does not actually have the power to release a credit hold.  What we do is, we notify your credit card processor that we no longer require the hold.

The processor then notifies their interchange bank, which then notifies the bank that issued the guest's credit card, which releases the hold.

These action are supposed to take place more or less instantly - but that doesn't always happen. In particular, it is common for the guest's bank not to release the hold for several days after they've been notified that they can.  It is extremely common, almost the norm, for this to happen if the guest is using a debit card.  This is why many hotels and rental car companies recommend that you not use a debit card - they use holds too, and suffer from the same problem.

We have absolutely no control over this, it is entirely a function of the guest's bank who won't even talk to us.  Sometimes the guest can call their bank and get their customer service folks to dig into the records, find the message to release the hold, and make it happen more quickly.  Other times they just have to wait until it clears itself out, however long that may take.

The guest says I took their money instead of placing a hold.  But I didn't!

If they're using a debit card, they're half right.  Yes, the money value in the amount of the hold has been removed from their account.  You don't have it, though - their bank does, and will keep it until you release the hold, and often for several days or a week later.  The bank makes (a little bit of) interest from holding this money in their account, so they're in no particular hurry to put it back.  This is why credit cards are preferable to debit cards.  Unfortunately, we have absolutely no control whatsoever over this behavior - you don't think the guest's bank listens to us, do you?

The guest says I took two security deposit holds and now their credit card is maxxed out.  But I didn't!

Actually, yes, you probably did without knowing it.

Security deposit holds do not last forever - the precise length of time they last is controlled by the bank that issued the card, and can differ from bank to bank.  Usually it's around a week or 10 days, which is why we recommend that the Held and Released numbers discussed above be as low as practical.  We have no way of knowing that length of time upfront, but we do get warned when the bank is about to release the hold without our asking it to.  Naturally, the longer the guest's Booking, the more likely this will occur.

When this happens, OwnerRez automatically just places another hold.  This is not displayed in the Booking record or anywhere else, it happens invisibly in the background.

Depending on the lead time of the bank's warning to us, it is possible for two holds to be active at the same time.  Or, as discussed above, the banks often aren't in a big hurry to actually release the hold, even when they told us they were going to.  Again, this is something we have no control over.

I thought I had a security deposit reserved, but now OwnerRez is telling me it's declined?

What probably happened is what's discussed above under "two security deposit holds" - the first one expired, we tried to take another one, and there wasn't enough credit available.

You can try to manually reserve another security deposit yourself - the first hold may have been released, restoring credit limit.  Or, you could reach out to the guest for a different credit card.  You can do this in the Booking, Transactions tab, Security Deposit dropdown button.