Because of the dynamic nature of hotel expenses, hotels are often classified as high risk by credit card providers and merchant accounts. Since they generate higher than average chargeback rates, new hotels often have a difficult time opening a merchant account. This also means that hotels are typically required to pay higher rates and fees, and are required to jump through more hoops than lower risk businesses.

There are a number of ways hotels can minimize their risks and protect their ability to accept and process credit cards at reasonable rates. Here, we’ll go over a few authorization tips for hotels when accepting a credit card payment.

Authorization

The authorization process is fairly straightforward. A merchant requests authorization from the card issuer through a POS terminal for the amount of the purchase. However, with hotel transactions, that amount can vary based on in-room purchases, extended or shortened stay periods, or damages incurred by guests.

A good tip for a hotel accepting credit card payment is to make an estimated authorization. An estimate should be based on the room rate plus applicable taxes, the expected length of stay, and approximate incidental charges, like room service. This process allows you to estimate total charges when your guest checks in, so you won’t need to collect more payments later.

When your guest checks out, you need to make a final authorization as well. If you didn’t make an estimated authorization, you simply need to make an authorization of the actual amount of the transaction. If there was an estimated authorization made, you need to determine whether an incremental authorization is required. If the actual bill exceeds 15% of the estimate, you need an additional authorization for the extra amount.

Extended Stay

If your guest decides to increase their stay, you’ll also need to make an incremental authorization. That’s because the initial authorization approval is only valid for the original stay length. Furthermore, if your guest extends their stay beyond 2 weeks, you should settle the original transaction and request authorization for a new approval.

When accepting a credit card payment, try to estimate as accurately as possible in order to avoid multiple authorization requests. Sometimes your estimate will be too high and you’ll need to initiate an authorization reversal.

Delayed and Amended Charges

Many times, hotels discover damages or required charges after the guest has already checked out and completed their transaction. In this case you’ll need to initiate a delayed or amended charge. When your guest checks in, you need to make sure they sign a form authorizing you to do this; otherwise, you won’t be able to initiate these charges. If this happens, you’ll need to obtain another authorization approval and keep the transaction on file. You should also send the customer a copy of the transaction to avoid a chargeback.

Accepting a credit card payment at a hotel can be a complicated process. It’s not hard to see why the industry is considered high risk. Following authorization guidelines will help you avoid costly chargebacks. For more information on hotel credit card payments, contact Allied Wallet today. We can help you make sense of this complex process and simplify your credit card processing.