The Need for Security Deposits in STR

The Importance of Taking Security Deposits in Short-Term Rentals

As a short-term rental host, protecting your property while ensuring a smooth guest experience is crucial. One of the best ways to safeguard your investment is by requiring a security deposit. Yet, many hosts hesitate to implement this policy, fearing it may deter bookings or add unnecessary complexity. In reality, taking a security deposit provides significant benefits and can be easily managed through automation tools.

Why Should Hosts Take a Security Deposit?

A security deposit acts as a financial safeguard against damages, excessive cleaning costs, lost keys, or policy violations. Here are some key reasons why you should require a deposit:

Financial Protection – Accidents happen, and guests may sometimes cause damage. A deposit ensures you have funds available to cover minor repairs or replacements without disputes.
Discourages Careless Behavior – Knowing there is a financial hold on their payment makes guests more likely to respect your property and follow house rules.
Reduces Risk of Fraudulent Bookings – Requiring a security deposit can deter bad actors who book properties with malicious intent, such as throwing parties or engaging in fraudulent activities.
Covers Extra Cleaning Fees – If guests leave your rental in an unreasonable state, a security deposit provides funds to cover the additional cleaning required.

How to Take a Security Deposit on Different Booking Platforms

Each short-term rental platform has its own approach to security deposits. Here’s how you can implement them across the major booking channels:

Airbnb

Airbnb does not allow hosts to directly charge a security deposit unless you are connected to an approved property management software that has the capability of this integration
Airbnb’s AirCover for Hosts may cover some damages, but having a security deposit in place adds an extra layer of protection.

Booking.com

Unlike Airbnb, Booking.com allows hosts to collect a security deposit independently.
Do not allow booking.com to collect the deposit for you, as they do not collect it from the guest, and if the guest refuses to pay, they decline your request.
Hosts can request payment via bank transfer, PayPal, or a credit card hold before check-in – ensure you have a rental agreement that you request guests to sign and state this in there.
It is crucial to communicate this in the fine print in your listing to avoid disputes.

Vrbo

Vrbo provides an option to charge a refundable security deposit or offer guests the choice of a non-refundable damage waiver.
Deposits can be collected via pre-authorization on a credit card or a separate payment.
This flexibility allows hosts to tailor their approach based on their risk tolerance.

Direct Bookings

With direct bookings, you have complete control over how you collect security deposits.
The most common methods include cash on arrival, pre-authorized holds on credit cards, manual bank transfers, or damage protection insurance.
Many Property Management Systems (PMS) offer automation tools to handle security deposits seamlessly.

Ways to Collect a Security Deposit

There are multiple ways to collect a security deposit, ranging from fully automated to manual processes:

Automated via Property Management Systems (PMS)
- Many PMS platforms offer built-in security deposit collection, pre-authorizations, and automated refunds.
- This removes friction for both the host and guest, ensuring a smooth process.
Semi-Automated Options
- Payment processors like Stripe, PayPal, or direct invoicing allow you to request and refund deposits with some manual oversight.
- This is useful for hosts who want control but don’t want to fully automate the process.
Manual Collection
- Some hosts request a bank transfer or PayPal deposit before check-in.
- It is also possible to put a hold on an amount in a Guest Paypal account / credit card -see below for further information on this!
- While this gives full control, it can create friction and delay bookings.

Are There Any Drawbacks to Taking a Security Deposit?

While security deposits provide protection, they do have potential downsides:

Guest Resistance – Some guests may be hesitant to book a property that requires a deposit, especially if competitors in the area do not require one.
Increased Administrative Work – Manually tracking and refunding deposits can add to a host’s workload if not automated.
Potential Disputes – If a guest disputes damage claims, it may lead to negative reviews or additional time spent resolving issues.

Final Thoughts

Taking a security deposit is one of the most effective ways to protect your short-term rental from unexpected costs while encouraging responsible guest behavior. While each platform has different policies, finding a collection method that works for you is key. Automating this process through a PMS can save time and reduce friction, making it easier to manage your rental while ensuring peace of mind.

If you’re not currently taking security deposits, now is the time to implement this practice and protect your property from unnecessary risks!

Solutions for Security Deposit Holds / Pre Authorisations

Many PMS offer security deposit holds through stripe, but generally only offer up to 7 days max on the hold (Beds24 offers up to 30 day hold on visa and Mastercard). This is fine if your guests stay for 3 or 4 days, but if you often have guests staying more than this, then you probably need a different solution.
There are some PMS that automatically extend the hold when the 7 days come to an end (Owner Rez), and some that will automatically charge the card if the stay in longer than eg 6 days (Zeevou).

If your PMS does not offer this, you can look at a solution like Charge Automation.
They will integrate with your PMS, or you can add manual bookings yourself. They will send the guest messages that you set up to request card details from the guest, collect ID, ask for rental agreement signature, and also can take payment for you as well. Then when the security deposit is due, they will put a hold on the card, and release it x number of days after the stay, unless you decide to charge the card.

There is also a possibility of you taking a pre authorised hold yourself. If you have the card details, you can do it manually in the stripe dashboard – by creating a payment, but in the advanced section, choose the capture later option.

If you do not already have the guest credit card details, you will need to find a way to receive these securely and get permission to pre authorise the payment from the guest.

This solution is through Jotform, and you can take a security deposit hold of up to 7 days through Stripe, or up to 30 days via Paypal.

Paypal 30 day Pre Authorisation

Instructions for this:

1. Go to Jotform, and create an account if you do not already have one.

2. Go to My Forms, Create a form, start from scratch, classic form

3. Change the text of Form to “Security Deposit Pre Authorisation via Paypal”. Then add whatever text you want underneath to explain what you are asking for eg “As per the terms of your booking, This will put a 29 day authorization hold of €100 in your Paypal account in the unlikely event that damages occur during you stay. Check-in instructions will be emailed to you once the hold is authorised”

4. Add element on left. Under Basic drag Full name, and email address into the form

5. For paypal 30 day preauthorisation, click on payments tab in Add elements section, choose Paypal Personal (note that the 30 day hold does not work with Paypal business account)

6. Add a product – change “Product Name” to Security deposit hold, and change the value to the value you would like.

7. Click on Payment Properties button – the Green one top right.

8. Click the plug to connect your Paypal Personal account, change the currency if necessary, click the Authorisation Only to on.

Then go into settings at the top of the form, change the title, check the form status is enabled, and click publish at the top of the form.

You can share the form with someone and ask them to complete – note that it will not work with your Paypal account, they will need to complete the form with a different account.

Once they have completed the form, in your paypal account you will see the transaction appear like below.

If you then need to collect payment at any time until the 30 day period is up, click on collect payment and you will see this, and you can capture the value required.

Stripe 7 day Pre Authorisation

1. Go to Jotform, and create an account if you do not already have one.

2. Go to My Forms, Create a form, start from scratch, classic form

3. Change the title text of Form to “Security Deposit Pre Authorisation via Stripe”. Then add whatever text you want underneath to explain what you are asking for eg “As per the terms of your booking, This will put a 7 day authorization hold of €100 on your credit card in the unlikely event that damages occur during you stay. Check-in instructions will be emailed to you once the hold is authorised”

4. Add element on left. Under Basic drag Full name, and email address into the form

5. For Stripe preauthorisation, click on payments tab in Add elements section, choose Stripe

6. Add a product – change “Product Name” to Security deposit hold, and change the value to the value you would like.

7. Click on Payment Properties button – the Green one top right.

Connect your stripe account, change the currency, and swicth off the option to Charge customer immediately.

Then go into settings at the top of the form, change the title, check the form status is enabled, and click publish at the top of the form.

Try yourself to complete the form.

You will be asked by your bank to authenticate the transaction and it comes up as a pending transaction.

You will receive an email with the details and the option to charge the amount – pressing this will charge the card with the full amount. You can also see all pending transactions in your Jotform dashboard – click My Forms and then My Tables

If you then wish to charge the customer, you have up to 7 days to do this.

If you want to charge the full amount, you can do from the email confirmation, or from Jotform Tables.

If you want to charge part of the amount, you should go into your STripe dashboard, under customers you should be able to see the customer and the card details will be saved there. Then create a payment for that customer with the amount you wish to charge.

If you have any issues, follow the instructions on Jotform, or contact their support

Hopefully this has helped you to understand your options on taking a security deposit, and why it is important.

If you need any further help on setting up systems for your short term rentals, or for increasing direct bookings, please get in touch here