Hey! Where’s my Security Deposit Refund?
Hi Robert. I’m just wondering when my security deposit will be refunded. I haven’t seen it on my credit card statement…
Thanks for your question. Unfortunately, you are sort of catching us in the midst of some long-term policy changes and the process of updating our information for guests, so it’s not surprising that you have this question.
It always strikes me as funny when a guest says they haven’t seen a refund of a security deposit on their credit card statement. I want to ask in response “Did you see a payment of a security deposit on your credit card statement?” Of course, I do understand the confusion, because I have been unable to yet update all of our guest information to make what is going on more clear. So here, in detail, is why you won’t be receiving a refund for a security deposit.
In the beginning…
For almost a decade since we first started operating, it used to be that we would take a fully refundable $500 Security Deposit from each guest just prior to their arrival, and then refund it after their departure assuming everything is left in good shape. About four years ago we added the option for the guest to pay a non-refundable $79 Damage Waiver instead of the refundable Security Deposit. And we gave guests the option to choose which route they wanted to go.
The pandemic changed things…
Then, in mid 2020 when the pandemic began, our Credit Card processor imposed collection from us a 10% reserve amount on every transaction we did, irrespective of whether it was a charge or a refund. (They were worried about massive refunds coming due in our industry due to all of the cancellations happening at the time.) So in our case, every time we took and then refunded a security deposit, it cost us $100 out of pocket, which would be paid into a holding account that we had no control over, a ridiculous situation, and one we couldn’t afford. Their policies were simply not created for businesses like ours which constantly took substantial deposits and then refunded them, rather than apply them to other money that a customer owed. In addition, we practically never have need to charge anything against a security deposit. (We have great guests!)
So we made the decision (and this was also due to the fact that we were now working with a processor that had the ability to do this – our previous one did not) to instead take a $500 Credit Card Authorization, in a manner similar to what hotels have traditionally done. With an Authorization no money is actually charged against the Credit Card, rather the amount is set aside out of the card credit limit to be charged later, only if necessary. And again, that almost never happens. Years go by without us having to charge anything against a Security Deposit!
Check your receipt!
From the guest’s point of view, providing an Authorization seems identical to making a regular credit card payment, but the receipt states Authorization Only on it. And nothing is actually charged against the guest’s credit card. No money ‘changes hands’. The amount, whatever it is, is simply temporarily reserved out of the credit limit on the card. No payment is made.
Credit Card Authorizations automatically expire and so don’t need to be processed or refunded later. If nothing is charged against the Authorization, it simply ‘disappears’ as if it was never there in the first place. You won’t see them on your credit card statement, either when created, or when they expire.
This is the reason why you won’t see a refund of a Security Deposit on your credit card statement. It was never actually paid in the first place.
I do apologize for any confusion caused. Hopefully we’ll be able to get a decade’s worth of information, FAQ’s and automated emails all corrected soon so our guests can better understand what is happening with Security Deposits and how they are handled now.
( I first wrote this in response to a question from a guest about their ‘refund’ and decided to post it here so I could easily share it with others when the question came up again. I’m aware that someone reading this may wonder why I took the time to write this article, rather than fix the guest information. Unfortunately that’s a much bigger job than writing this answer was! Your understanding is appreciated!)
And please… if you held off completing your guest exit survey, or giving us a great review because you were waiting to have your Security Deposit refunded before you did so, please take a few moments and share with us (And everyone else if you enjoyed your stay Hah hah!) your comments. We really do love to receive them!