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Chargebacks and PayPal for Vacation Rental Transactions
What are chargebacks, why are they different on PayPal, and how can you avoid them?
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What is a chargeback?
A chargeback is when a buyer asks their credit card company to remove a purchase/charge from their credit card statement. Before removing the charge, the credit card company will ask for the reason/dispute for the charge.
Common reasons for chargebacks include:
- Fraudulent purchases due to stolen credit cards or credit card numbers
- The buyer makes a purchase that was not fulfilled as per the agreement (e.g. not shipped, damage, not as shown, etc.)
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Why are chargebacks on PayPal different?
Unlike the credit card companies who take responsibility and cover the cost of fraudulent charges or unsatisfactory transactions, PayPal simply provides a means of transferring money between buyers and sellers. What this means is that if a renter requests a chargeback after staying in your property, PayPal will not automatically take your side. Instead, they take a step back and look the evidence presented.
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If they deem the evidence significant enough, they will contact the credit card company and it is the credit card company that makes the final decision regarding the reversal of the chargeback.
How to prevent chargebacks?
- Keep the lines of communication open with your renters. If they're unhappy, make sure that you know about it before they go to the lengths of requesting a chargeback.
- Screen your renters by talking to them on the phone.
- Make every single renter signs a rental agreement well before their stay. The agreement should contain specific information regarding cancellation and refund policies.
Your rental agreement is your best protection for preventing and fighting chargebacks, so it's a good idea to have your rental agreement checked over by an attorney well-versed in the industry.
Relevant Links:
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