There is a lot that goes into vacation rental property management. As a property manager, you work tirelessly to ensure guests have an excellent experience. A large part of that experience is how your customers pay for the rental. Guests can be finicky and if you can't take their preferred payment method or their payment is denied, they may rent from someone else.
Unfortunately, vacation rental property managers frequently have issues with their payment processors. Many property managers complain about their processors freezing or holding funds or even terminating their account without any explanation. This would be a major issue for any business but can be especially harmful for property managers that are just getting started.
Why does this happen? Is there anything you can do to avoid it? Are there other options to consider? We'll answer all these questions and more.
To properly answer this question, you need to understand something about payment processing. Fraud, money laundering, and other financial-related illegal activities are directly and indirectly related to payments. Therefore, any type of payment — cash, card, PayPal, etc. — comes with a certain amount of risk and liability.
Financial institutions of all types (i.e. banks, payment processors, credit card companies, etc.) minimize risk by actively monitoring for illegal activity. Some industries have higher financial crime rates than others. Unfortunately, vacation rentals are frequently linked to scams, which means your payment processor is going to pay closer attention to your merchant account.
Some payment processors are more cautious than others and are quicker to freeze or hold funds if any activity on your account is even potentially suspicious. This could include one or more of the following:
Unusually large or small transactions
Transactions from unfamiliar vendors
Transactions in foreign currencies
Using too much of your credit line
Frequent chargeback requests
Freezing your funds gives the payment processor time to investigate the validity of the transactions on your merchant account. If your payment processor needs to double check your activity too frequently, they may decide to close your account. They'd rather play it safe and not deal with the hassle.
This can be a real problem for vacation rental property managers. Bookings are often made months in advance. If your payment processor freezes your account or puts a hold on your funds, you could end up having to cancel guests' reservations. In the vacation rental industry, this is a surefire way to lose business and damage your reputation.
There are plenty of processors out there, some are more cautious than others. Do your research and read customer reviews. If several reviews mention frozen or held funds and unexpected termination of service, look for a different processor.
Be sure to monitor your transactions and make sure they fall within the "normal" range for your business. If you frequently have large or small transactions, be prepared to explain why to your payment processor. You should also keep an eye on chargebacks and disputed transactions. If you have a high number of these, your account will be flagged — which could lead to a freeze or hold. Be sure to resolve any disputes as quickly as possible and keep detailed records of all transactions.
If you're planning on making any changes to your business, be sure to let them know in advance. This includes things like changing your business name, address, or phone number. You should also keep them updated on any changes to your products or services. This will help you avoid any surprises that could lead to a freeze on your account.
Some payment processors have software that makes it easier for property managers to keep track of transactions, chargebacks, disputes, etc. Others only process credit cards and offer minimal support afterwards. These additional features and support make it much easier for you to keep your account in good standing. We recommend you find a processor that has these features or look to add software that is compatible with your current processor.
Payment processors are quick to act when they suspect fraud. If you keep your account in good standing, you should have no problem. If you do run into issues, be sure to contact your payment processor immediately.
Well...yes and no.
In today's society, you have to be able to at least be able to accept credit cards and debit cards in order to survive. You have to use a payment processor in some fashion. But you do not have to be stuck with a processor that constantly freezes your merchant account.
Different payment processors specialize in different industries. Some like to stay with simple, straight-forward transactions, while others are able to handle more sophisticated payment challenges. We strongly encourage you to utilize a payment processor specializing in vacation rental property management, travel, or similar industries. This will provide the best experience for you and your customers.
Nexio has partnered with Hostaway to provide property managers with the best possible experience when it comes to payments. Our platform was built to handle complex payment needs. We understand property managers need sustainable payment solutions that will scale with them as their business grows. Nexio removes the complexity of payments, allowing you to focus on the profitability and success of your business now and in the future. Contact us for a free consultation to see if we're the right choice for you.
Given how challenging it is to run a vacation rental business, you shouldn't have to waste time regularly resolving payment processing issues. If you often find your funds frozen or held, look for a new payment processor that will better suit your needs.