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Charging customers who don't show up

By  |  Published: January 30, 2017

Your Business Credit
Your
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of 200kfreelancer.com, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for CreditCards.com.

Ask Elaine a question or read her prior answers in the 'Your Business Credit' archive.

Question Dear Your Business Credit,
I have a small hospitality business where guests are only asked to enter the credit card details to ensure the online booking. I get the credit card details of the booker – namely the card number, the cardholder’s name, the PIN and date of expiration. How can I charge the guests in case of no-shows? Is there an online way of entering the card details and having the money sent to my account? – Roshan

Answer Dear Roshan,
No-shows are frustrating – and a real hassle for owners of small hospitality businesses. However, you do have to be careful about charging customers who don’t show up.

To charge guests for “no-shows,” you need to have a written agreement with them, according to George Csahiouni, co-founder of TransMerit Merchant Services, a firm that focuses on customizing processing solutions for retailers and businesses.

“The guests would need to either sign or click to agree that they understand they will be charged for not showing up,” Csahiouni said in an email response to questions. You can do this within a simple online form that you check off in the agreement, he said.

Beyond that, you should have customers click to agree that they are authorizing a transaction to be completed on their credit card, he said. This credit card authorization will protect you from disputed credit card transactions, giving you proof to provide to the processing company and banks that the transaction was authorized if you need it.

By using an online payment gateway from your merchant processing company, you can conduct the transactions online, Csahiouni said.

“The online payment gateway can be embedded in a mobile application or website to be able to accept payments,” he said. “The deposits will be made to whichever bank account you have on file with your merchant processing company.”

Katie Orkin, the general manager of Preferred Payments, a merchant services provider,  recommends using a virtual terminal in a situation where the card is not present.

“It is not only the most secure, but it allows the business to store the card on file for later use if ever necessary,” Orkin said in an email response to questions.

“A virtual terminal enables you to key enter the card number, along with the cardholder’s name, expiration date, billing address and the transaction amount,” Orkin said. “The business can then process the transaction conveniently and securely.  At the end of the day, the virtual terminal will automatically settle and send the deposit directly to your bank account.”

Beyond these practicalities, however, there is another issue to consider: Is there a way to reduce no-shows? No customer is going to like getting charged for a room he or she has not been able to use and has forgotten to cancel.

I would urge you to investigate best practices in your industry for reducing no-shows. Perhaps stepping up your confirmation procedures could reduce instances when you need to charge people for rooms they haven’t used – so you can rent them to someone else instead. This could require a little extra work for you and your team, but it could go a long way toward reducing no-shows. 

See related: Does a business have the right to charge a card on file? 

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Updated: 06-24-2017

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