Managing security deposits and payments efficiently is crucial for car rental businesses to prevent financial losses and provide a seamless customer experience. With modern online payment solutions, rental companies can authorize, hold, and charge payments securely.
However, the reservation software you use plays a critical role in handling these transactions. Payment processing companies, like Stripe, continuously evolve and introduce new features. Your rental software must be advanced enough to support these functionalities, ensuring smooth integration with payment gateways and compliance with the latest industry standards.
In this article, we'll explore how payment authorization works and how platforms like Stripe can help car rental companies manage deposits and security holds effectively. At the end, you can watch a video showing how easy this process is with VEVS Car Rental Software or learn more about how VEVS integrates with 15+ payment providers and how online payment processing works.
Understanding payment authorization in car rentals
When customers book a rental car online, they typically provide their credit card (CC) details to complete the reservation. Car rental companies can choose between charging the card immediately or placing an authorization hold for a security deposit.
What is payment authorization?
Authorization (also called pre-authorization) is a process where a payment gateway temporarily holds a specified amount on the customer's card without actually capturing the funds. This ensures that the customer has sufficient funds available, but the money is not withdrawn unless the business finalizes the charge.
For car rental companies, authorizations are particularly useful because:
- They secure the deposit amount without charging the customer upfront.
- They prevent unnecessary refunds if the customer cancels.
- They allow additional charges (such as late fees or damages) to be processed later.
Using Stripe for deposits and security holds
One of the most popular payment gateways that support authorization holds is Stripe. They allow car rental companies to hold a deposit during the reservation process and later charge or release it depending on the rental agreement.
How it works with online reservations
- Customer makes a reservation: They enter their credit card details while booking online.
- Car rental company places a hold: Instead of charging the card, the company authorizes an amount (e.g., $300 security deposit).
- Hold duration depends on Stripe account settings: Depending on account type, holds last from 7 to 30 days before automatically expiring.
- Final charge or release: After the rental, the company can either:
- Capture the full or partial amount (if there are extra charges).
- Release the hold if no charges are necessary.
Why Stripe's authorization feature is essential
- Card-on-file convenience: Stripe securely stores customer CC details, allowing rental companies to charge extra fees (for fuel, damages, or late returns) after the rental period.
- Automated security deposit management: No need for manual refunds - Stripe releases the hold automatically if not captured.
- Flexible payment control: Businesses can decide whether to charge immediately or hold and charge later, depending on their policy.
Best practices for handling deposits in car rentals
- Use a reservation system that supports advanced payment features: Ensure your car rental software integrates with modern payment processors and stays updated with the latest authorization features.
- Clearly communicate deposit policies: Inform customers about how much will be held, for how long, and under what conditions it will be charged.
- Use authorization holds instead of upfront charges: This reduces disputes and chargebacks while ensuring funds are available.
- Monitor Stripe's hold duration: If your account has a shorter hold period, consider capturing the amount and refunding later if necessary.
- Enable automatic card storage: This allows for seamless additional charges post-rental if the customer incurs extra costs.
- Hold the security deposit a day or two before the car returns: Since Stripe blocks the amount for 7 days, this approach ensures you have access to the security deposit for 5-6 days after the car is returned.
- Check with Stripe for an IC+ account: Ask your Stripe representative about the IC+ account and feature, which can extend the security deposit hold to 30 days - giving you more flexibility to process post-rental charges.
Car rental companies can significantly improve their security deposit management by using payment authorization features from gateways like Stripe. Instead of collecting a large deposit upfront, businesses can place a hold, ensuring customer funds are available while reducing friction in the booking process.
However, to take full advantage of these capabilities, your car rental reservation software must support advanced payment functionalities. A well-integrated system will ensure compliance with modern payment standards, keep transactions secure, and provide the flexibility to adapt as payment gateways introduce new features.
Watch our video to see how VEVS Car Rental Software simplifies handling deposits and security payments seamlessly!
Would you like help integrating Stripe into your car rental business? Contact us to learn how our VEVS Car Rental Software can handle secure online payments effortlessly!
