Why pre-authorizations are perfect for charging security deposits

If you’re running a rental business, chances are you’re already putting security deposits to good use. Charging them is a great way to increase the chances of getting your rental items back...

If you’re running a rental business, chances are you’re already putting security deposits to good use. Charging them is a great way to increase the chances of getting your rental items back undamaged or at least covering repair and replacement costs. In other words, they’re a valuable tool to manage risk.

Chargebacks and refunds

Now, you’re likely charging your customers’ credit cards for those security deposits, and why not? Credit card payments are incredibly convenient. But for the rental industry, there’s one huge disadvantage to this workflow: chargebacks.

By charging security deposits in advance, you’ll end up having to refund most of the payments as rental items usually come back in good enough shape not to keep the security deposit amount.

And besides the transaction fees involved in refunds and chargebacks, there’s another drawback from the customers’ perspective.

Most refunds take a couple of days to be processed. And given that security deposits can be considerable sums of money, having to wait before you get your money back negatively impacts the customer experience—especially when customers treated your rental equipment with care and returned the items in perfect shape.

Because there’s a better way to charge security deposits, we offer a pre-authorization feature in Booqable. Let’s look at pre-auths and why they’re such a valuable payment option for the rental industry.

What are pre-authorizations?

A pre-authorization (or “pre-auth” or “authorization hold”) is a temporary hold on a credit card that typically last around seven days or until the authorization is “captured.”

It means you temporarily block funds on your customer’s credit card without taking any money from the cardholder’s account. You ensure sufficient funds are available if you need to capture the security deposit amount when rental items come back damaged. In a way, you reserve the funds so the cardholder can’t go and spend this money anywhere else.

How to pre-authorize credit cards

Now that you know pre-authorizations are a super useful payment option for the rental industry, most notably for charging security deposits, let’s see how they work.

To start pre-authorizing credit cards in Booqable, make sure you have a Stripe account and connect it to Booqable. Once connected, performing a pre-authorization involves two steps:

  • Pre-authorizing the order amount and security deposit amount
  • Capturing the authorization and deciding whether you want to charge the security deposit or not

Pre-authorization screenshot in Booqable

The second step needs some more explanation. When a customer returns your rental items, you have three choices when it comes to capturing the authorization:

  1. Charging only the order amount and letting the security deposit amount fall off (for example, the products came back in perfect condition).
  2. Charging the order amount and partially capturing the security deposit amount (for example, the returned items had some minor damages or might need servicing).
  3. Capture both the order amount and security deposit amount (for example, the products were beyond repair or went missing).

Note: Pre-authorizations must be captured within seven days.

Pre-authorize credit cards with Booqable

It’s obvious to see why pre-authorizations can be an extremely useful payment option for rental businesses, especially those with high refund or chargeback fees.

At Booqable, we’re all about giving rental business owners the tools they need to be successful. If you’re running a rental business and charge security deposits, you might want to use authorization holds for most of your customers’ credit card payments. Not only do they save you time and avoid high transaction rates, but they also ensure that customers are getting a better rental experience.


Check out our Help Center for more information on pre-authorizing and capturing credit card holds in Booqable.

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