They’re familiar, easily available, require little-if-any overhead, and are almost as good as cash when it comes to the hands-on satisfaction of having money in your pocket. But if your vacation rental is still dealing with checks, are you leaving yourself exposed?
Beyond the fact that travelers strongly prefer to use credit cards, many vacation rental owners have run their businesses using checks for years with no problem.
But as the more unfortunate will tell you, it only takes once. Beyond the misrepresentation of using a lost or stolen checkbook, checks are vulnerable to counterfeiting, alteration and forgery. There’s also the risk of a bounced check – a potentially costly situation, even when it’s not maliciously done.
No payment method is “fraud free”, but checks are the worst
Checks are also not the only way you can fall victim to fraud; there is no form of payment that’s guaranteed to be “fraud free”. However, fraud experts and victims have tagged checks as a common target.
“One of the simplest and most prevalent ways to commit financial crime, to steal money, is to commit some form of check fraud,” said lawyer James Freis Jr., then-director of the government’s Financial Crimes Enforcement Network, at a conference in 2010.
In business-to-business transactions last year, checks were involved in 87 percent of reported instances of fraud. Whether it’s as high in the vacation rental industry is unknown, but the underlying message is clear: If you’re still dealing with checks, you need to protect yourself.
The overpayment scam: common flags to watch for
Whether you accept checks exclusively or as one of several payment options, you should know the warning signs, like
- poor grammar and punctuation,
- claiming the trip is a surprise for someone else, or
- insisting that payment will come via a third party.
On their own, these flags may mean nothing; your guests may be visiting from another country, planning a special occasion, or traveling with financial support from their family.
But if an inquiry seems suspicious you should proceed with caution; a phone call is a good place to start. (One easy tip: Copy a somewhat unique line of text from the email and Google the phrase; scam emails are often repeated, and may show up in search results.)
One of the more common schemes is for a scammer to pay significantly more than the amount due, then ask for a refund of the difference; by the time the fraudulent transaction is caught, the person has disappeared – and so has your legitimately hard-earned money.
How to protect your rental business
Developing detailed payment and check acceptance policies, and applying them equally to all your guests, can help protect you.
Allow a lot of time for checks to clear. Most owners require full payment at least 30 days in advance. Even when the funds are deposited in your bank account, it can take at least one month for a fraudulent check to be discovered – at which time, you would need to pay it back. As a result, some owners suggest allowing even more time for funds to clear.
Balance your business needs against security recommendations. The U.S. Small Business Administration (SBA) offers advice for accepting checks, advising that you only accepting checks from local or in-state banks and verify ID with other documentation. This is solid advice, but with so many guests from other states or countries, it isn’t always practical. An owner on this HomeAway thread asks for a copy of a guests’ passport information, but keep in mind that some state laws dictate what ID you can require.
**There’s no easy way to deal with checks internationally. **As noted above, checks aren’t ideal when it comes to long-distance transactions – for you or your guests. Advice from Frommers to wary travelers lists credit cards as the best option and online solutions, like PayPal, as a close second. Checks leave both parties open to fraud and, in an industry already fighting issues of trust, it’s hard to to dissuade any sense of insecurity.
Know what to look for. The SBA also explains what to watch for on checks you receive, like appropriate personalization, the correct date, valid bank ID numbers, and the customer’s signature – ideally backed by supporting photo ID.
Call the issuing bank. Depending on the bank, you may be able to verify a check with a quick phone call. Financial professional Justin Pritchard recommends getting the phone number from the bank’s website – rather than the check itself – then calling to see what happens. “Some banks make it difficult to verify funds,” he wrote in a post for About.com. “At the least, they should eventually tell you if the account exists. From there, you’ll have to take your chances.”
Another option to consider is to subscribe to a check verification or check guarantee service (often these are bundled together). These services can at least confirm whether checks have bounced from the provided account, and may offer a guarantee for the amount of the check in case of fraud.
Please note: This advice is meant to be a starting point, not a replacement for expert counsel. Confirm your own banks’ policies and protections for deposited checks; review the laws in your state around check fraud. Understand how check fraud could impact you and develop policies for your vacation rental that will help protect your interests.