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How to Avoid and Manage Chargebacks

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If your guests use a credit or debit card to pay for their accommodation, there’s always a chance that they can dispute a charge and file a chargeback claim by simply pressing a few buttons on their banking app.

Holiday cottage businesses should therefore be proactive when it comes to preventing and disputing chargebacks.

What is a chargeback

A chargeback happens when the bank agrees to reverse the payment and refund to the cardholder after they have disputed a transaction.

The different types of chargeback

Generally, chargebacks are initiated for a variety of reasons, but generally, they are the result of:

  • Unauthorised card use: the booking has fraudulently been made with a stolen credit card
  • Merchant error: the guest is charged the wrong amount
  • Consumer disputes: this generally occurs when a guest claims the goods or services were not provided, were not as described or there has been a breach of contract.

Customers usually start a chargeback claim when they’ve exhausted all other avenues with the retailer or service provider to get a refund.

Why holiday rental businesses are vulnerable to chargebacks

If you’re running a holiday letting business, there are many different reasons guests might issue a chargeback before or after their stay.

Here are just a few:

  • Your holiday let didn’t meet the guest’s expectations
  • Something happened during their stay that they felt warranted a refund
  • They had to leave your holiday rental earlier than expected, so felt they could ask for a refund
  • They request a chargeback because they didn’t recognise the transaction for your rental on their statement
  • A guest’s request to cancel their booking and have their deposit/full amount refunded was refused as per the booking terms
  • The refundable damage deposit has been deducted from or not returned in full due to damage or extra charges incurred

Covid-19 chargebacks

With coronavirus significantly disrupting the travel, tourism and hospitality industry, holiday rental owners are seeing an increase in chargebacks. This is because some guests have had to cancel due to COVID, have refused to change their dates or a accept a credit note and aren’t receiving a refund for their holiday.

How to contest a chargeback

If you get a notification of a chargeback you have the option to dispute it. Cases aren’t usually quick to resolve, the process can be quite time-consuming, and the outcomes aren’t always predictable.

  • Once you have the details about the type of chargeback, you can contest it.
  • Make sure you respond to a chargeback immediately. You only have a limited number of days to respond, so you need to send your counterclaim through as soon as possible to avoid missing your chance to fight the claim.
  • You will need to prove with supporting documentation that you haven’t broken the contract and that the deposit/full payment isn’t refundable as per your terms and conditions. The same for a damage deposit deduction or extra charge (e.g. for cleaning/over occupancy). However, if your terms allow guests to cancel and get some of their money back, they are likely to have a valid claim.
  • Prove that the guest agreed to your t&c’s and house rules during the booking process.
  • Include details of any attempts to resolve this matter directly with the cardholder (guest).
  • If the guests’ holiday has not been able to legally proceed as planned because of the coronavirus pandemic lockdowns your decision on refunds should not breach consumer law.

If you successfully dispute the claim the money will be ‘clawed back’ from the guest.

How to prevent chargebacks

Disputing a chargeback can be a long, drawn-out process that has unpredictable results. The best thing a holiday let owner can do is put policies in place to help minimise the chances of a guest chargeback in the first place.

Below are some general tips to follow.

Make your cancellation policy and house rules clear

If a customer disputes your refund policy or for something which they may have been charged for, your best line of defence is that not only were they given all the appropriate information, but they also agreed to it when booking.

On the last step of your booking process include a checkbox with a link to your booking terms and conditions and house rules. Guests will only be allowed to complete their booking by confirming that they have read, understood and agree to your t&c’s by ticking the checkbox.

Document everything

Include a copy of your policies in the booking confirmation email.  Also keep a copy of any guest communication until a couple of months after their holiday has finished. These records should stand you in good stead if you need to prove to a card issuer that a chargeback is unjustified.

Be accurate in your advertising

Review existing listings, photos and advertisements to check for any unintentional inaccuracies or anything that might be misinterpreted by your guests.

The key to success here is to be as accurate as possible so that you paint a clear picture of what bookers can expect – thereby setting their expectations correctly from the start, and avoiding negative complaints, lukewarm reviews and unexpected chargebacks.

Think about how you’re describing things such as the size of the property, its features, the views, and aspects which could cause stress if they become a surprise for guests during their stay – for example, limited access to a parking space or nearby construction noise.

Ensure your list of amenities is accurate

The longer you run your holiday rental the more likely it is that you’ll experience broken appliances or amenities coming to the end of their life. It’s therefore important to regularly ensure they are in excellent condition.

This avoids your incoming guests getting stressed out or disgruntled when they find the Wi-Fi connection is poor, that the heating system is broken or that the hot tub isn’t in use because it’s in need of its annual service.

Deal with guest concerns promptly and professionally

The sooner any guest concerns are addressed the less likely they will escalate into a dispute. Consistent communication is key.

Process legitimate requests for a refund quickly

If a guest requests a refund and it meets the requirements of your cancellation policy/terms and conditions, ensure you process the refund promptly. By reacting speedily, you avoid both annoying your guest and the chance that they request a chargeback via their bank at a moment which overlaps with a refund still ‘in process’ on your side.

Ensure guests will recognise the transaction on their statement

Use a clear payment description for your booking transactions that your guests will be able to immediately recognise on their statement. So, for example, instead of using ‘TBF’, use ‘The Brighton Farmhouse’. This avoids any worry or panic on their part where they believe a fraudulent transaction may have taken place.

Can guest claim on their travel insurance?

For cancelled bookings, encouraged guest to claim from their travel insurance provider rather than filing a chargeback. Many guests will have travel insurance in place which may cover them for cancellation and travel disruption. However, this will depend on the policy terms and conditions.

To summarise

As a holiday cottage owner, you have to decide whether you’re going to stick firmly to your cancellation and refund policies, or if you’re going to make exceptions to avoid the possible chargeback process.

Preventing and managing chargebacks starts with honest and transparent communication with guests, along with clear terms and conditions.


  • Rickbond |

    An well written and helpful post. I’ll include a reference to it and a link back to the article in the October Holiday Homefront Newsletter for holiday property owners.

    • Philip |

      Thanks Rick. Unfortunately it seems that chargebacks are being successful – regardless of T&C’s.

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