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Simply put, chargebacks are a part of doing business if you offer online payment options. Landlords, however, can arm themselves by understanding the ins and outs of chargebacks to help reduce the odds of losing a disputed charge.<\/p>\n
A chargeback is a request by the cardholder that an original charge be reversed. Chargebacks can be requested for both credit card charges as well as debit card transactions but with a slight difference.<\/p>\n
Credit card processors pay the original transaction and add that amount to the card holder account as debt. A chargeback on a credit card returns the original money back to the credit card company and they in turn will post a transaction on the card holder\u2019s ledger that cancels the original amount owed.<\/p>\n
For debit card holders, the process is similar but the funds are actually drawn from the debit card holder\u2019s bank account for the initial payment and then, if a chargeback is awarded, the funds return to that same bank account.<\/p>\n
In either case, the financial institution (whether a bank, credit union, or credit card company) is operating on the behalf of their client (the cardholder) and not in the interest of the landlord.<\/p>\n
A chargeback period is the amount of time a consumer has to initiate the request for a reversal after the initial transaction. For landlords the consumer means a renter, co-signer, or applicant. In many cases, chargebacks are requested within days, but often can be many months. How much time the card holder has to initiate a chargeback is at the discretion of the financial institution. There are some nuances depending on the type of card used but generally the chargeback period limit is 120 days<\/a> or as long as even two years.<\/a><\/p>\n A refund is a request from a consumer to the merchant asking for their money back. The refund is initiated by the merchant.<\/p>\n A chargeback by-passes the merchant (landlord) and the consumer (renter, applicant) goes directly to their financial institution or credit card company and requests a reversal.<\/p>\n Adding insult to injury, your merchant processor and\/or the financial institution may charge you fees for processing the refund or a chargeback \u2013 with chargebacks being the more expensive option.<\/p>\n Unknown charges<\/strong> Application fees<\/strong> Relationship status change<\/strong> But it\u2019s not just the heartache of divorce, separation, or breakups between partners that can cause havoc, new relationships can also bring on confusion if their new partner doesn\u2019t recognize a transaction processed with or without their permission.<\/p>\n Human error and fraud<\/strong> To err is human, and you might run into a situation when someone doesn\u2019t use the card they intended to use and instead of asking for a refund, opt for a chargeback. It\u2019s one of those cases where some proactive measures might have saved you from the hassle and cost of a chargeback. Take a look at how you can help to mitigate those situations.<\/p>\n It\u2019s important to be proactive in countering chargebacks because it not only helps to reduce them, but also prepares you if you need to defend against one.<\/p>\n Payment Policy<\/strong> Authorization<\/strong>What is the difference between a chargeback and a refund?<\/strong><\/em><\/h3>\n
\nCommon Chargebacks in Property Management<\/h2>\n
\nIf you saw an unexpected charge on your account, you\u2019d likely ask for that to be reversed if you knew you didn\u2019t authorize that transaction. And so is the case for those that are making payments for rent on behalf of your tenants such as co-signers, first time tenants like college students getting payment help from parents and grandparents, or even an employer that covers rental expenses. They may have offered to help make payments but might not recognize the charge on their bank statement or credit card statement.<\/p>\n
\nIt\u2019s not uncommon for someone denied a rental to then decide to process a chargeback and that can be frustrating for landlords. Since it\u2019s a unique type of transaction and process, check out this guide on how to tackle rental application chargebacks here: How To Deal with Rental Application Chargebacks<\/a><\/strong><\/p>\n
\nA once happy couple or a friendly roommate situation can quickly turn into a financial fiasco for a landlord. Let\u2019s say one person pays the full or partial rent, and then moves-out mid-month without warning. They may feel it in their right to initiate a chargeback either out of entitlement, vindication, or spite. Or, in join-account scenarios the party who stayed processes payment and the party who left may attempt a chargeback before dividing assets.<\/p>\n
\nUnless someone is fully authorized, It is fraudulent to use anyone else’s credit or debit card, even if it\u2019s a close relation or relationship as noted above. However, there are also bad players with criminal intent out there to scam the unsuspecting landlord. Chargebacks are just one way scammers like to play the game.<\/p>\n
\nProactive Measures to Reduce Chargebacks<\/h2>\n
\nPut in writing a clear payment policy in your lease and rental agreements. Stipulate in the lease or rental agreement what types of payments are approved, what happens when payments are late or come back as non-sufficient such as fees, etc. when it comes to your payment policy. Be sure to include a no-refund policy if needed.<\/p>\n
\nEven if you have built-in authorization forms in your landlord software<\/a>, it\u2019s also good to include an electronic payment authorization form in your lease packet. In that, be sure to get the names of everyone living in the apartment on lease and\/or rental agreement and an electronic payment authorization form signed by each party who will be making payments. Don\u2019t forget to get authorization forms from those who are not going to be occupying the home but are responsible for payment such as co-signers.<\/p>\n