Protection from Credit Card Chargebacks

Credit card chargebacks probably cost your hotel thousands and thousands of dollars each year. With changing privacy policies, hotels are finding it harder and harder to protect themselves against chargebacks. In the old days, guests would check-in, present a credit card and an ID. The guest service agent would imprint the credit card on the back of a registration card and have the guest sign. Now, check-ins are often paperless and many hotel chains such as Marriott do not allow hotels to imprint credit cards.

Here are some suggestions to protect your money:

  1. Make sure every credit card presented at the front desk is swiped. Have accounting periodically run reports from the PMS and audit to make sure that all cards are swiped. Conduct further training with the front desk on the importance of swiping every card. Swiping the cards will also save you money on your transaction fees. We will get to third-party credit card authorization forms in the section below.
  2. Set a credit limit for in-house guests of one to two thousand dollars. Post a payment every time their account gets to that level and deliver a copy of the folio to their room. Then make sure that a new authorization is taken after each payment is posted.
  3. Monitor guests for unusual purchasing. Guests staying on stolen credit cards are usually the guest who go wild with room service, in-room movies, telephone, etc.
  4. Make sure the front desk gets a current address and phone number from every guest, especially walk-in guests. This is one area that is most neglected, especially when the front desk is busy. Also, in many counties in the US, it is the law.

What to do when a credit card is not present:

  1. Have a strict policy on the use of third-party credit card authorization forms. Have all requests processed through the accounting department rather than the front desk.
  2. Make sure that your authorization form requires the cardholder to fill in their name, credit card billing address, and signature.
  3. Require the cardholder to fax over a copy of the card and their photo ID if possible. However, many hotel chains no longer allow this. If you cannot do this, use step 4 below.
  4. Use an ‘Address Verification System’ to verify every authorization form received. Most major credit card processors such as Chase have an automated system available and it takes just a minute or two. Do not accept a credit card if you can not verify the billing address.
  5. Require payment in advance or a deposit when using a credit card authorization form. This is especially important if you accept an authorization form for large amounts like a group block, meeting room, or catering function.

As privacy policies continue to become more strict, it will be difficult to prevent chargebacks unless you stay on top of the tools you have on your side. Of course, we will continue to keep you updated in any way we can.