If you're still collecting a real security deposit on every reservation, refunding it after a clean checkout, you're paying a tax on trust. It's a small tax per booking, but run it across a full calendar of stays and it adds up to real money left on the table, for a protection that, in most cases, never needed to touch a dollar at all.
Here's the fix, and it's not a new tool or a new PM software subscription. It's a switch most hotels made decades ago: stop charging deposits, and start placing authorization holds instead.
Why "Security Deposit" Is the Wrong Word for What You're Doing
A deposit implies money actually moves. The guest's card gets charged, the funds sit in your account (or your payment processor's), and you send them back after checkout if nothing's damaged. That's the model most self-managing hosts default to, because it's what feels intuitive.
The trouble is what happens on the refund side. Payment processors like Stripe don't hand back the processing fee when you refund a charge. Say you collect a $500 deposit on a booking and the stay is perfect, no damage, no complaints. You refund the full $500. But the roughly 2.9% + $0.30 fee Stripe charged on that original transaction, about $14.80, stays with the processor. You paid to move money that never should have moved in the first place.
Run that across a busy year. A host running 200 bookings a year with a $500 deposit on each one is quietly handing back close to $3,000 in fees on stays where nothing ever went wrong. That's not a rounding error. That's a full month of utilities on several units, or the line-item that would have paid for this year's furniture refresh.
What an Authorization Hold Does Instead
An authorization hold is the model hotels have used since credit cards existed: at check-in, the front desk places a temporary hold on a slice of your available credit. No money changes hands. You don't lose access to that portion of your limit unless the hotel actually charges against it. If your stay is clean, the hold just falls off.
That's the exact model that should sit behind every direct booking and, where the platform allows it, every OTA reservation you take. Using Stripe, a hold typically lasts seven days with a two-day grace period on top, giving you roughly nine days to act on any issue. For a two-night weekend booking, that's plenty. For a two-week stay, it isn't, because the hold can expire mid-reservation. Anything longer than seven days needs to be reauthorized before the original hold lapses, or you lose the ability to charge for damage discovered on day 10.
Build that reauthorization step into your PMS or channel manager reminders now, before it costs you a claim you can't collect on.
Let ADR Decide: Hold or Waiver
Not every unit in your portfolio should use the same approach. The right call usually comes down to your average daily rate and what guests in that market already expect to pay.
Lower ADR, competitive market: stick with an authorization hold. It adds nothing to the guest's total at booking, and in a market where three comparable listings are one click away, a few extra dollars of upfront fees is exactly the kind of friction that sends a price-sensitive guest to the listing next door instead of yours.
Higher ADR, or an established vacation-destination market: a damage waiver can make more sense. This is a small, non-refundable fee, often run through a provider like Safely, Waivo or Generali, that the guest pays at booking as built-in accidental-damage coverage. It does raise the total price of the stay, so it works best where guests already expect to see it, the way they'd expect a resort fee at a beach destination.
If you're not sure which bucket a property falls into, look at what comparable listings in your market are already doing. Guests notice inconsistency more than they notice the fee itself.
The Nine-Day Clock: What to Do the Moment You Find Damage
Even with the right structure in place, something will eventually break, stain, or go missing. When it does, speed and paperwork decide whether you actually collect.
- Act inside the authorization window. Don't wait for the next cleaner cycle or the next time you're on-site. The clock is already running.
- Document before you charge anything. Photos, video, and timestamps, ideally cross-referenced against your pre-stay walkthrough photos so there's a clear before-and-after.
- Message the guest before the charge posts. Tell them what you found and what you're charging for. Skipping this step is the single fastest way to trigger a dispute, and a host who communicated first and documented well is in a far stronger position if the guest pushes back with their card issuer.
- Size your hold to the real risk, not a round number. The charge is capped at whatever you authorized. A $200 hold on a unit with a $4,000 leather sectional doesn't actually protect you.
Even a well-documented, well-communicated charge can still be disputed, and disputes don't always resolve in the host's favor. Treat the hold as a strong deterrent and a real backstop, not a guarantee.
Don't Mistake AirCover for a Full Protection Plan
If you host on Airbnb, it's worth knowing exactly what AirCover does and doesn't cover before you lean on it as your only line of defense. It's a genuinely useful baseline, but it comes with coverage limits, exclusions, and a claims process that can take time to resolve, which is exactly when you don't want to be waiting on a payout.
The strongest setup layers protections instead of relying on one:
- An authorization hold or damage waiver, chosen by ADR and market norms, on every reservation.
- A hold amount sized to the property's actual furnishings and risk, revisited any time you renovate or upgrade.
- A documented turnover checklist your cleaner or co-host runs at every checkout, not just when something looks off.
- AirCover, host-guarantee programs, or a landlord/short-term-rental insurance policy as the backstop behind all of it, not the whole plan.
The Real Payoff
None of this stops every incident. What it does is close the gap between hosts who assume they're covered and hosts who actually are, and it does it without adding friction for the overwhelming majority of guests who never cause a problem at all. If you're managing a handful of units yourself, this is a fifteen-minute policy change per listing. If you're scaling past a handful, it's the kind of system worth standardizing before your portfolio, not after a bad claim teaches you the hard way.
For more on building the operating systems behind a portfolio that runs itself, our free STR Management Handbook walks through the guest-communication and turnover standards that pair well with a solid deposit policy.
Tim breaks down real numbers on this, including where the authorization-hold math gets tricky on longer stays, on Episode 350 of the podcast. If you want a second set of eyes on your own protection setup across a growing portfolio, book a strategy call and we'll walk through it together.