Hello. Welcome back to another great episode of My name is Sarah Karakaian.

I'm Annette Grant, and together we are Thanks for Visiting.

Let's start this episode like we do each and every week, and that is featuring one of you, our listeners who are heading on over to STRshare.com, sharing everything you can about your short-term rental so we can to celebrate you here on the podcast and on our Instagram account every Sunday. Annette. Who are we sharing this week?

This week we are sharing @HiddenAlpineLodge, again @HiddenAlpineLodge. And I just wanna say, I love when people share their story on their account because Jake and Brittany is their lifelong dream to have a cabin in the Colorado Mountains and they made it come true. So that just, ah.

All the fields.

Yes. It makes, it's like such a cute picture of them and I just, I wanna be a part of their story, but I wanna give Jake and Brittany a huge shout out because they, their account, they have been doing a ton of Instagram reels. So if you are a host and you are looking for inspiration on what to post on your social media, please go check out their feed. Give them some love, but just see all of the different ways that they have been creating content in reels. So whether it be reels, whether it be on TikTok or your stories, just check out. It's a, it's a, it's a little cabin in the woods and they are, they have got real after reel, after reel, after reel. So just check it out, take inspiration, give them a follow. Well done.

Love it.

I also wanna go to the mountains now. Yep. It looks so dreamy.

Alright, so in today's episode is not so dreamy. We are going to tackle the topic of chargebacks. It's not the first time we've talked about chargebacks on the podcast, but it bears repeating 'cause it's just good to have some. We're gonna really get into some prevention. Or ways to deter chargebacks from happening. If you don't know what a chargeback is, if you didn't listen to that previous episode, which we'll link to in the show notes if you're interested. Uh, that is what today's episode is also about, is educating you on what it is, what happens if it happens to you, and that ways to deal with chargebacks. And as we'll get into a little bit later in the episode, the raw truth about chargebacks.

All right, let's get into what a chargeback is. It is not fun. But here's, I wanna share this with you. I want you to understand what it means when I say merchant of record. Okay? So this is the, the whoever is merchant of record, that is who is responsible for the processing of a fee, right?

A payment.

A payment. I love that. I'll give you an example. So when you have an Airbnb booking. The guest pays through Airbnb. Airbnb transacts that, right? They process it and they send you your cut. Right? So Airbnb is the merchant of record. Mm-hmm. Right?

For example, think about it, you go through your bank account at the end of the month, every time you swiped your debit and or credit card, you're gonna go through, and those are the merchants of record for all of the transactions that you made.

Now, for many of us, if you use vrbo as one of your online travel agencies where you list your property.

Which we encourage you to diversify.

They get you, or Furnished Finder is another popular one. They get you the lead, they get you the potential guests. They go through that. They go through that process of selecting you, and then they actually pay you directly for that stay. So you are the merchant of record.

Okay. When you say you pay them, like the guest pays you directly.

The guest, right. The guest pays me the host for my stays when they book via vrbo. Right. Or if I, if I get a tenant on Furnished Finder, Furnished Finder finds me that person, we communicate on Furnished Finder and then they pay me the host directly. Right. Furnished Finder doesn't take that payment, it doesn't process it and then send it to me. I am the merchant of record. Why is this important? I'm sharing this with you because when you are the merchant of record, that is when you could be made aware of a chargeback. What is a chargeback? A simple definition. We have it written down here, a guest dispute the charge with their credit card company. Now, you will probably never see this with an Airbnb guest because pop quiz. Because Airbnb is the merchant of record. Airbnb handles any chargebacks they may get through the processing situation. When you are the merchant of record, you need to be aware of those processing, uh, fees and all the activity that happens when, whether you use stripe or anything like that, whatever that payment processor is, because if a guest disputes their stay with you, that charge, it's called a chargeback. You are responsible for handling it. I just wanted to explain to you that it's not such a big concern with your Airbnb guests, but it is a bigger concern where you are the merchant of record. That make sense?

And of course as we're talking about chargebacks, we obviously want you to be diversifying as much as possible. So direct bookings are involved here too, in the chargeback.

Yeah. So here's the thing, as you can already tell, I know we haven't told you. Uh, you know, why chargebacks happen or how to take care of them yet, but obviously there's a negative connotation around them. But we, I just wanna say this now before we get into the meat of it. Do not, I repeat, do not let this discourage you from diversifying your bookings on vrbo, on other OTAs with your merchant of record direct bookings, because I'm telling you, putting all of your eggs in the Airbnb basket has its own financial setbacks, okay? Right. And chargebacks. We're gonna go over it, but they're not that common. And there are ways, obviously we're gonna go over that today too, how to help, uh, not prevent them, but,

deter them,

deter them from happening. Mm-hmm. Please, for them, listen, they're not fun. They're emotionally like. I'll get a little story time here. I had a chargeback. So again, a chargeback is whether the guest disputes the charge with their credit card company. And you hopefully know us by now or if you're new to hanging out with us. Um, we very much love our guest. I want my guests to be very, I want them to have, offer a five star review because they had the best time with us and I would never do anything where they felt like the value wasn't there or that they got duped. Right? And I've gotten a chargeback, uh, my first one after over a decade of hosting last year. And you just feel violated because you, you can dispute them and you can try to work with the, the person who's disputing them or who's issuing the chargeback. And when you can't come up with a resolution, you just feel like, I don't know, it's frustrating.

Right. And some people rightfully so, deserve to be charged back.

Yes.

There are instances,

yes,

that the credit card company does need to side with the client because they didn't have, yeah. The service provided that should have been provided.

So I'm gonna use my notes here, but I wanna share with you that, so a charge back is when the guest claims fraud or that services weren't delivered and your money gets pulled back. So if you're the merchant of record, I, I am just gonna use my payment processor for, uh, vrbo bookings, Furnished Finder, bookings, and direct bookings. We use Stripe. Okay. It's a very popular payment processor.

Big fan of Stripe.

Yeah. It's a great, great customer service, by the way. So let's say the guest books their stay with you and they use their credit card to pay, and the money gets deposited, processed through Stripe, and then Stripe deposits into the whatever account you set up for it to deposit into. Well, the guest then disputes the charge and they have the ability to take those funds back. Right. Whether it's literally from your account or from, uh, current transactions that are happening, they will take it out and they will return it back to the guest's credit card.

And this is a huge reason. We've probably all seen it before. Part of credit card's selling point is that they protect the consumer. Yeah. And they're huge advocates. That's why they like with, with credit cards, this is something that they will sell you on.

Yeah.

That, that they do have the ability to protect you in these type of circumstances over and above, let's say like a debit card.

Let's give an example of where a chargeback would be warranted for the guest. 'cause I know that there are bad apple hosts out there. They're what make our lives so hard. What happens is, you know, the, the guest booked a stay. They arrive and it is nothing like it was pictured online.

Uh, another actual reason is it was not their credit card. Uh, it could, someone could have used a stolen credit card to book a stay with you, right? Therefore, I did not stay at your property even though it was on my credit card. Then that's another reason for getting charged back.

Right now there's also the kind of chargeback, which is what happened to me last summer, where a guest booked a stay and we delivered on the stay, and we actually asked for the guest identification. So the guest, what his ID said, matched the reservation, um, and matched the credit card name on the credit card, but he said it was fraud. So he said that he never stayed there. Right. And that it never, he has no idea what's happening here. And it's like, and then you have the opportunity and we'll get into it, like to dispute it, but it is so. It is it, it is built to protect, like Annette said, the consumer. Mm-hmm. And it does make it very hard for us small business owners to dispute that charge and to win these chargebacks. So we'll get to what you can do to help that and to, like Annette said, to deter it. But there are times when the people who issue the chargeback, they're the ones who are the thieves, unfortunately. And you just have to kind of. Learn from those instances. Sometimes there's honestly nothing you can do about it. Dust off your shoulders and move on.

Mm-hmm. It's, it's part of building it into your whole business plan.

Yes.

So I, I don't know any business of all businesses that I've been a part of, there have always been returns, refunds, chargebacks. It is a part of doing business. And that's why I think for me, it doesn't hit as hard anymore because I've, I've gone through, in every industry that I've been in prior to hosting, I was privy to the accounting and I was the one that would see chargebacks and would have to dispute chargebacks. So they are just the cost of doing business. There isn't any industry that I've been a part of.

Right.

That I have not felt the sting of a chargeback.

And I don't want, you think we mentioned, you know, Airbnb guests, you don't have to really worry about because Airbnb, I mean their, they get chargebacks, I'm sure all the time. They just handle it because they're doing so much volume. Again, like Annette said, they bake it into their, their budget. Mm-hmm. Right? They're prepared for these things. And I do wanna give a little caution with Airbnb. I don't, I can't fully explain what happens, but there are times, and this is why it is important, when you are heavily reliant on Airbnb to make sure that what, when a guest stays with you, an Airbnb reports what your cut is to make sure that amount actually shows up in your bank account. So while you'll never, everybody will never come to you, like when a guest charges back, uh, they'll, I've never experienced that. I think they just take care of it, and you still get paid out. But there are times when Airbnb has made mistakes and the funds either didn't hit my account or it's happened where Airbnb will alert me that, Hey, this guest is booked, but their stay is not fully funded yet. Airbnb will, uh, tell you that a guest, there's something going on with their payment, right? It's not fully funded, and so to keep an eye on it and you're like, well, Airbnb, should we cancel the guest until they're fully funded and paid for their stay, but, and they ask you to keep an eye on it. So all I'm saying here is, well, you don't have to worry about chargebacks from Airbnb. You still need to be on top of the transactions and the financial picture with Airbnb. And do some auditing there.

Now we're gonna go over nine chargeback prevention strategies. So buckle up.

Yeah, these are important. Okay. These are gonna help you be aware. Maybe be like, Hey, this might be coming our way. Number one, screen, these last minute bookings. Why Annette?

Um, the biggest thing if these cards are stolen, the last minute bookings, um, they wanna try to get the transaction done fast. I don't know if any of you have gone through any sort of fraud. It's terrible. I hope it hasn't happened to you, but you will see they are hard charges, pun intended. There they are going after as much as possible in a very short amount of time before said owner of credit card is tipped off and reports it to credit card company.

Right. And this is a big reason why when if, when you go check into a hotel, the first thing you do, usually I think technology is changing things, but usually you go to the front desk And you tell 'em you have a reservation. They ask for your. Government ID.

Yep.

And they also ask for your credit card so they can see that your face matches your face and it matches the name on the credit card. Uh, we don't really do that in the short term rental world. Right. We do everything online. We give 'em a code, they check in. So because fraud mostly happens last minute 'cause they're trying to get these charges in before they get caught. Anything that happens, I would say a week out before arrival, I'd be really aware of, right? Be on, on high alert. Uh, and if, here, here's the thing, I, I don't want you to not do direct bookings because of this. I don't want this to scare you. So what I'm gonna offer you is this. Maybe you don't allow guests to book direct with you if it's a week out or less. Right. Maybe that's where you let the OTA, like the Airbnb guests. Maybe those bookings can happen last minute. Just so until you have your own chargeback strategy in place to help you with this. Again, it's not like that common, I'm just trying to give you some things 'cause I just don't want you to be so worried about it that you freeze up and don't do anything and you don't allow direct bookings or where you're the merchant of record. So that's something that you could put into place, but just be aware. These people are booking last minute and they're trying to check in right away so they can get away with it.

So to prevent it, try to cross reference their ID and credit card.

Yes, that is ideal. I mean, you could, even if you do want this to happen, direct bookings last minute, you could, I don't know, meet them at the property. You could meet 'em on a Zoom call. You could, uh, if you have secure measures, you could ask for their photo identification, holding up their ID and their credit card. Right? Like just. You, there's lots of things that you can do. I just want you to have a process in place. Okay? Number two is be aware when a guest is trying to split up across multiple payment methods. Okay? So if they're trying to use multiple cards, multiple different amounts, um, we don't want them to confuse you. Whatever process you have in place for that one credit card. Like showing them that it's them and the credit card matches, then they have to do it for all three cards. Mm-hmm. So don't let a lot of motion and commotion like derail you from under processes you put in place.

Number three is just be skeptical of a guest having accusatory language. This is called projection. They know that they're trying to ha, you know.

One over on you.

Yeah, there's some fraud going, so they're gonna ask you a lot of questions like, how do I know this listing is legit? How do I know that the, uh, the door code's gonna work when I get in there? This is where you just really wanna start reading between the lines. If there's some accusatory language coming at you, you just kind of wanna pump on the brakes and know that they might be projecting that they're getting ready to commit fraud.

Number four is asking for exceptions or big discounts. Now, this not only could tip you off to a fraudster, it could also just tip you off to a guest who you'll never be able to please. But questions like, can you waive the cleaning fee? Can we check in four hours early? Can I pay you, you know, directly via Venmo for a lower rate? 'Cause then you don't have to pay the processing fees, right? Or only book with you if you have a big discount in your house is way too expensive. Anything like that, I'd be on high alert and have some sort of messaging that you can share back with them that maybe you're not the best fit for them because they might be getting ready to commit fraud.

Okay, number five is the guest is giving like vague, evasive responses. So maybe you're asking 'em why they're traveling to town and it's a one word, one word answer just for a visit. Or we're asking about the guests that are coming with them and they're like, don't worry about it. You, again, these are all like great fraud prevention, but they're also just red flags of maybe a guest that you don't wanna host to. So you'll be able to tell in that language, um, when you might be asking some questions to the guest. Are they being super vague? And you can clearly tell they don't wanna communicate with you.

Number six, pressuring you to book quickly 'cause they don't have time to talk to you. So things like, I need to book right now to send me the payment link or I'm in a rush. I don't have time for all of your answers. Right? Like it's just a reminder and we'll repeat this maybe a couple more times 'cause it's worth repeating. If you have a process stick, stick to it.

And well, here's a story really quick. We were just, this happened on a weekend for us where someone wanted to. Book, um, a multi-month stay. And they're like, oh, I need to move this weekend. I'm driving to town. Let's just get this done. And it was like, these are red flags all over the place. And again, sometimes you can get excited 'cause there's this, um.

A lot of money potentially coming in.

A lot of money potentially. And these were like, and we were actually like trying to help the guests for a minute and they're like, wait a second. Why do they need to move out of their current place into somewhere new? Why are they coming to town? They didn't plan ahead, so it's like, and we were very hospitable, like, Hey, why don't you try, you could stay a night or two here while we work out the midterm contract, do our normal processes there. But again, and this can happen on a short, even a nightly stay, if someone is trying to rush you and have you skip steps or just need to get in quick, those are definitely red flags. And number seven, trust your gut. This is how there, there's actually a term called, called the Harvard Hunch. And it's when you have that hunch, you have that feeling, intuition like you've seen something like this, it's gonna happen again. And we all know it. Um. Everybody watching this channel has probably had that guest where they knew ahead of time, like, oh, I just knew that guest was going to either cause an issue, maybe do the chargeback. So again, at the end of the day, it is your business. Trust your gut.

All right. Prevention tip number eight is a clear guest agreement and or house rules. So when you have that guest agreement, it's not only protecting you from liability, it's also sharing with the guest what they're agreeing to when staying with you. And so some things that you wanna keep in there are what your cancellation policy is. Very clearly. Lay that out on what to do. What is your policy if there are grievances? And the fact that your property is as is so an as is policy. This, and we'll get into this in the next, in, in a little bit here, but what to do when you want to, uh, fight a chargeback and having a rental agreement signed by this guest is gonna help you a little bit. We'll get to it. Uh, what happens when you. Uh, refute, uh, a chargeback, but having them agree to something like this and having it stated in there that, hey, it's as is. Here's what they're supposed to do if they have a grievance, and here is the cancellation policy. Also make sure, and you know what? Annette and I are huge on inspections before guest arrival. And this is your opportunity also to make sure that the product that you are offering is exactly what you advertised. So you wanna check for wear and tear. Are there any local things happening with noise going on in the area? Guests will say that they didn't like the product IE your property because of local noise situations. Check for bugs before check-in, right? You wanna eliminate any possibility for them to not like the home or the product before they check in.

And last but not least, number nine is you wanna create SOPs, standard operating procedures. When there is a conflict. This is where we also see chargebacks happening because there is friction.

The guest gets pissed because you are also upset.

Yeah.

Because of whatever, right? Yeah.

So we want to make sure we know. And the, and let's just make for some examples here, maybe like the pool wasn't operable. The pool heat wasn't working, the hot tub was down. You know, things weren't what they had anticipated. That's why that rental agreement is so important. But when something, when there is an issue and it starts to escalate, there's a couple things. Number one, you do just wanna get on the phone with this person and, and make sure that you have an understanding of what's going on, how you're gonna resolve it. Even after that phone call though, you are gonna wanna get it in writing because a lot of times, let's say you are giving some compensation back for an issue that had had arisen. You wanna make sure that you have it in writing, that they are, this is, this is making them whole. You're closing the loop that everything is good to go because that's where you don't wanna get in the issue where they're calling the credit card company after the stay saying, Hey, pool heat was down. I don't wanna pay for it. I wanna charge back where you can hopefully say no. We discussed this was a compensation, so you wanna have, um, make sure that if there is an issue, it's in writing, there is a resolution, you're closing the loop on it and you wanna take the emotion out of it.

Yes.

This is where, um. We had someone give us this really great tip of like, whenever these discussions are happening, like imagine you are like in a court of law, like how would you present yourself? That would just be all facts, right? It wouldn't be feelings. So you wanna make sure that when you are going through this conflict, um, resolution with your guest, that it's very factual. Everything's in writing. Two parties are in agreeance.

And I'll say this too, this is the art part. I wanna give you some black and white. Examples here, but I don't know that I can, you have the contract that tells what the grievance policy is, right? Or you have like what happens if the pool heat is down? The WiFi's not working. And the whole reason we say to not only get in a writing, but also hop on the phone with this guest is so that you can deescalate the situation with the tone of your voice and that you're calming at, you're coming at them as a human being. But also if it's the, if it's the difference between them being so upset that you're being such a stickler to your agreement and not giving them any money for the pool heat or the wifi being down, that they then go to the chargeback option. It's like sometimes if you feel like just giving them a little money back or meeting them where they're at in terms of like that value proposition because of some things in the houses and is expected, it's better than them going to their credit card company and saying, you know what? Just charge back the whole entire,

entire stay

just because you've been there. I mean, we were recently there actually where we just stayed at a hotel. Mm-hmm. Where the, long story short, we had some amenities that weren't working and they essentially didn't believe us. Okay. And so believe that if, if you can, they didn't believe us and it was after three nights we finally got. It was a TV in our room to get it to work. And it was like, had you just come up here and helped us the first night, we wouldn't have had three nights without being able to come back and decompressing and watching television in the, this was at a hotel, like a really nice hotel. And you just, we and we were so charged up and at night I were so upset about it 'cause they just wouldn't believe us that there was something wrong with the TV. They, they were assuming like we didn't know how to use the remote that, I mean. We didn't really mean it, but we kind of like, maybe we just call the credit card company and say like, no, right, because you just, 'cause they, they didn't want to deescalate the situation. We didn't do that, but I'm just telling you that's where it can go. Mm-hmm. So have your policies in place. Know when to stick your guns, but also know when to, like, pull back a little bit, meet the guests where they're at and see if you can just calm it down. Maybe do a little something, something for them so that there's no need to call the credit card company and, and start this whole debacle. All right. You're like, ladies enough. What? What do we do when this happens? What happens? How does this come? How does this go down? Here's what happens. Your payment processor will alert you. You'll get an email, and at that exact same time that you, they notify you that the charge has been disputed. They, they've already pulled the funds from your account, so money's gone. It's not like it gets to stay there, and then you get to like, no bye, and then you go into, Hey, you have this amount of time. To dispute the chargeback. Usually it's like seven to 10 days. 10 days?

Yeah. It's not long. So you've gotta be, you gotta be on top of it when you receive it.

Yeah. We want this content right now to be what you need to put a fire under you to put some sort of like a net set, SOP or checklist in place when this happens. What do you do first? Okay. Um. When it comes to you gathering, they're gonna ask you to gather evidence.

Well, yeah. And they're gonna tell you exactly why. The, um, there's like different buckets that the chargeback falls it. So they're gonna tell you why the client, the guest is claiming the chargeback.

Right. And often, even if it's fraud, where the guest knows what they're doing, right? They've, they've stolen someone's card and they're using it. For, for this stay. Um, but they're, we're, they're claiming it's fraud on your end. Right? Um, so you might gather evidence that no, they really did stay and they had no issues. During the stay, like I had, I printed out, uh. Every time they use the lock code, they saved the entire duration. I had their signed rental agreement.

All the messaging.

All the messaging where I pointed out in my writeup that they never once complained about the the home and their stay. And then I had it all nicely bundled into one PDF and sent it back to the payment processor. Within like 24 hours, you better believe it. It's like, I'm gonna try to keep this money if I can. Um, so any screenshots, receipts, guest communications, ag, like we said, agreements. Here's the thing, you might, before you start gathering evidence. Go like, yell into your pillow or talk to your business partner or your spouse and get out all the emotion. I understand you feel violated and you feel frustrated, but that's not gonna help in your gathering evidence. You need to remain factual and clear and concise. 'cause they're only gonna review, in my case it was like 10 pages and I could have had all this, like I was ready to give them everything I had. You have to be concise about it. Um, but here's the reality. And I, you're gonna get sad, but the reality of winning a chargeback is very, very small.

Yeah. We've talked to numerous hosts, hotel managers, again, my background in multiple different other, uh, businesses. Also, it is extremely hard to win the chargeback. And the reason we wanna share that with you and is actually to. Relieve you a little bit.

Yeah.

Of like, okay, if, if you lose the battle, it's, it's common. And, and I'm, we're just gonna be honest, like these chargebacks can be significant, you know? Um, ours was around a thousand dollars, but people, we, these are like. People, we've known people to 10,000, 30,000 like they can be, especially depending on if you're a co-host,

like watch out. We had a, a friend of ours who is a property manager, a co-host, and he had a lot of properties and there was a chargeback, like fraud ring going on where they booked multiple properties for an extended period of time, and it wasn't until the end of the month that he caught it and.

And again, even for you, like if you're an individual homeowner and it's peak season and it is that big, you know, hey, it's a $10,000 booking. Like, whew. Just be prepared that, um, you know, and we've talked to so many hosts, not so many, but a few hosts where these chargebacks, they hurt, they were significant and they did everything. You know, they tried to do everything to win the chargeback and they still didn't.

Even if you're, again, one of our team members used to work for, uh, Marriott and Hilton Hotels, and so these are big brands and they've got a lot of, uh, people in their accounting departments and they know they have processes for chargebacks. And she said it was incredibly rare for them to win. And they've got the whole process where the guest comes in, shows their id, shows their credit card, and they still get these things. So it's tough. Right? And we just want you to prepare for it. She did share with us though, that they would win some here and there.

Mm-hmm.

They would even, you'll get the chance, like let's say you, you defend yourself and then the credit card company comes back and says, Nope, you still lost. You can then appeal.

Yep.

And she says, just appeal.

Yeah.

Because she has won a very small handful of those working with so many transactions in a hotel. So don't give up. But also, don't feel bad if you don't win the chargeback.

So in review, again, let's make chargebacks part of our plan for the year, you know? They're not pretty. But again, every business has returns, refunds, chargebacks. This is where we wanna have a buffer for these type of things.

Yes. Uh, don't let this direct derail your direct booking goals. Mm-hmm. Don't let this derail you from using online travel agencies, OTAs, where you are the merchant of record because that's the real loss, then.

Mm-hmm.

Then they're really winning because you're not opening up and diversifying where your bookings are coming from, and that's just as financially risky.

Yep.

Uh, set up your team with a checklist of what to do. If any of these red flags that we mentioned today pop up in your business, right? Because the time to plan or to put together a plan isn't when it happens. It's now before you base it.

And if, if your team or you yourself get an email about a chargeback, now we understand, oh, we need, we have a limited amount of time we need to take, we need to take action here. And then again, we, we mentioned it, but please do like always dispute the chargeback.

Yeah.

Um, and then if you need to appeal it, and there are even further steps that you could take, we don't know if they would be fruitful, but we have heard of people also, you know, hiring an attorney, going after like personal, you know, like, hey, like taking it outside of the credit card companies. Again, these are like different types of disputes for larger, larger purchases because there's gonna have to be money involved there too with the, with the attorney.

With that, I am Sarah Karakaian.

I'm Annette Grant, and together we are. Thanks for Visiting.