5 Ways to Reduce Chargebacks in Hotels?

Chargebacks and refunds are not the same. There’s one very important difference between them: Chargebacks are much worse. In this article, you will not only learn about what chargebacks are but also how to reduce them. 


What are Chargebacks?

Sometimes a guest will check out of your property and then discover charges on their credit card that they don’t recognize. They will then dispute the charge with the card-issuing bank. The issuing bank will then start looking into the validity of the dispute. This is when a chargeback occurs. A certain amount will be returned to the customer by the bank. If the customer’s claim is proved right, you (the hotelier) will have to reimburse the bank. 


Why are Chargebacks Worse Than Refunds?

The above definition of chargebacks does not truly reveal how many hidden charges are involved. The thing is: the chargeback process is unfairly tilted in the favor of the customers. It is very hard for the hotel to prove that the customer’s claim is untrue. Basically, the “innocent until proven guilty” principle is reversed when it comes to hotel chargebacks. You have to have detailed and elaborate proof to hold up your innocence. The customer, on the other hand, does not have much of a responsibility to prove your guilt. 

Chargebacks involve tons of hidden costs, unlike refunds. A refund can directly be sent to the customers’ credit card without any additional charges. While paying a chargeback fee, you also have to pay the bank for settling the dispute. This means an operational cost, transaction fee, and a penalty fee. And your woes don’t just end here. 

You also have to take into account the amount of time and energy you waste in proving your innocence. Even if you are proven right, no compensation will be provided in return. Not just this. If you get a lot of chargebacks in a month, the bank might actually stop accepting credit card payments for your establishment. Also, the more chargebacks you get per month, the more your chargeback fee increases. So, this can go up from $20 to $100. With the additional fees involved, you might have to end up paying $125 out of pocket for a $50 dispute. 

In 2019 alone, chargeback fees cost merchants 4.4% of their revenue. Another statistic is even more disastrous. Only 18% of the merchants manage to win 60% of their chargeback disputes. So, the bitter truth is- the odds are not in your favor. If a chargeback dispute starts, you are at a significant disadvantage. 

This is why I am going to list 5 days to either avoid chargebacks or win the disputes. 


5 Ways to Reduce Hotel Chargebacks:


Provide Detailed Invoices

Hotels always have a tendency to pile up all the additional charges till the very end. The customer is then handed the final bill during the check-out. This is a guaranteed way to have dissatisfied and mostly confused customers. 

Guests are usually in a hurry during the check-out process. They don’t have time to scrutinize the bill and neither do they have to ask any questions. There is no time for doubt resolution. So, they end up carrying these doubts back home and then filing for a chargeback. 

Most of your problems would be solved if the guest just talked something over with you instead of the bank. This is why you should immediately provide detailed invoices of all the items/services a guest is paying for. This can be difficult if you are handing out actual bills (not to mention, an enormous waste of paper).

This is why a Property Management System like StayFlexi is exactly what you require. StayFlexi will immediately send a notification of the charge that the guest incurred on their cellphones. They can keep checking the hotel app/website to review all of their payments during their stay. 


Shift to Digital POS shops

The reason why it is so easy to keep track of payments with StayFlexi is that it digitizes the process of booking. Be it the act of booking a hotel room or ordering room service or booking a rental car. The guest does it all through StayFlexi. 

Since there is no paper trail to keep track of, these records are much easier to handle. Every single purchase and payment is stored in one database. The guest interacts with the Point-Of-Sale shops through their cell phones. So, there is a detailed record of all of their purchases. 

The added benefit of digitizing POS shops is that StayFlexi then returns to you detailed audit reports. You can find out which item sold the most or least if you depend on StayFlexi’s reports. 


Keep Records for At Least 3 Years

Did you know that most card-issuing banks mandate that you have to maintain your records for a minimum of 13 months? For American Express, this required record retention period is as long as 3 years. 

The guest can file the chargeback a long time after they have checked out. And the dispute settlement period itself can go on for months. So, you must make sure that you maintain records for at least 3 years. 

With StayFlexi’s cloud-based software, storing data becomes incredibly easy. No backup is required. The software stores detailed payment data for many years so that it can be presented during a dispute. Also, storing the data isn’t enough. You must also be able to find a tiny transaction detail years after it has happened. Since StayFlexi keeps all your data nearly organized, it rids you of the headache that something might vanish in the clutter.


Issue Quick Refunds

Refunds will also cost you money. But that will be way lower than the chargeback fee that you will incur if the refund is not paid. Whenever you have to issue a refund, make sure it goes through. Because if it doesn’t, you will have to pay exponentially more in the long run. 

There is no point in delaying refunds. The more you delay them, the more the guest will be convinced that you cannot be trusted. They are going to directly seek the bank’s help in that case. If this is exactly what you are trying to avoid, make sure the payment is processed quickly. 


Process Payments On-Site

As I have mentioned in the first point, don’t let the guest go back home- confused and dissatisfied. The thing is, most chargebacks happen due to “Friendly Fraud.” Friendly Fraud refers to a situation where the guest simply does not remember availing of a service. They see a charge on the bill that they cannot recognize. So, they report this charge without even realizing that they are initiating a chargeback process. 

This “forgetfulness” can simply be avoided if the guest is made aware of the charges immediately. Many hotels postpone the talk about money till the very end because they think it is an unsavory conversation. But this just creates more anxiety in the minds of the guests. They keep wondering how much they’re going to be charged or how much additional tax they have to pay.

That’s exactly why you must take StayFlexi’s help to immediately inform the guests how much they have to pay. Since these reminders come in the form of notifications, the guests don’t need to actually talk about money continuously. But if they see a charge that they don’t recognize, they can immediately inform you about that. They will be less inclined to directly approach the bank when they are still on your property. 


In Conclusion

Chargebacks can cost hotels thousands, if not millions of dollars. And since all payment options have become digitized now, the threat of chargebacks looms large over all merchants. Yes, a chargeback dispute is hard to win. But who can prove you wrong if you have proper proof lined up? This is exactly what StayFlexi helps you to do. It digitizes all payments and then keeps detailed records of these payments for as long as you wish to. 

Want to know more about how StayFlexi can help you reduce hotel chargebacks? Leave a comment below.

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