But it also means that you have to be careful to minimize your risks since you'll be processing the payments yourself. If your pricing policy includes reservation guarantee, then you have to take care for these charges to be collected. Online booking engines offer integrated payment methods. Let's compare the most popular - credit card and PayPal. Which one to choose? It is actually good to have them both – to keep your customers' comfort and confidence. But if you still want or have to pick only one, then how to decide?
Let's start with a short review of both method's features:
Many buyers prefer PayPal, because it gives them the possibility to pay without exposing their credit card details over the Internet. Especially if they don't know you and haven't interacted with you before. You would also be able to collect money from people, who don't own a credit card. PayPal offers different account levels, which give different options and payment limits. There are no monthly and set-up fees, charges apply per transaction and depend on your monthly sales. Money will go to your PayPal account and you would have to transfer it to your bank account manually. You can find here a nice comparison table for the possible accounts, services provided and charges. It's been regarded as disadvantage that with the standard account, the customer will be brought off your web site to finalize the payment. This can make the process a bit longer and it is possible that the client will check other sources and decide for another hotel in the meanwhile.
The big advantage of PayPal is the level of protection they provide to both buyer and seller. Disputes and claims are handled by PayPal specialists and in case of a chargeback a dedicated team will fight the credit card company on your behalf. PayPal provides many Seller's protection tools and claims to have a loss rate less than 0,5%. If you resolve a dispute or win a claim through the PayPal Dispute Resolution, you are furhter protected against a chargeback on that transaction. PayPal is an online platform where buyers and sellers can communicate and possible disputes could be settled before turning into trouble or even avoided.
A possible reason for your customers to prefer direct credit card payment could be bonus points or travel insurance that comes with the card. A direct payment system is also faster and you keep the booker on your web site.
You have to ask your online booking engine vendor about the way credit card payments are being processed. The software can be connected to your own merchant account or through a third party merchant, also known as “payment gateways”, or credit card details can be encrypted and sent to you to handle the payment manually. You shouldn't go for the last one as chargebacks would be very difficult to dispute. Usually, there is a monthly fee plus a percent of each transaction that will be charged from you. You will have to make a small research to find the best offer and choose your virtual POS provider.
Let's not forget that credit card companies are also interested in keeping their clients happy. It's very likely for them to fight against you in favour of the customer. Disputing a chargeback could be a struggle and cost you a lot of time and nerves. Make sure your online booking engine will provide you with a complete reservation summary including customer's agreement with your no-show and cancellation policy.
In conclusion, you will have to answer a few questions in order to make the best choice for your payment method – the volume of expected transactions, what kind of customers will book through your web site, is this site rather new or already popular and with positive feedback.
If you just start your online business and expect a relatively low volume of online payments, then PayPal is probably better for you. Though charges are the highest for the smaller amounts of monthly sales, they charge you only when you get paid. Paypal specialists will assist you in case of a payment problem and provide several tools to avoid or resolve chargebacks and disputes and your customers will feel more confident as they won't have to expose their credit card information to an unknown seller.
If you are an already experienced and well-known online seller, have many regular customers and usually receive a lot of payments through your web site, you may feel better with the credit card option. You will get the money directly into your account. You will have to fight chargebacks on your own but with trusted regular customers such are not very likely to arise. The monthly costs would be lower or at least comparable to PayPal's.
In both cases, your cancellation and no-show policy has to be clearly explained on your web site and included in the confirmation letter and reservation summary you send to your clients. Make sure a customer has to accept your terms and conditions before finishing a reservation and keep a proof of this acceptance. This documentation will be crucial in the event of a payment dispute and will help you keep possible losses to a minimum.