Prowess Property Management

An In depth Guide on How Airbnb Payments Work

An In depth Guide on How Airbnb Payments Work

To say that payout is probably the best part of being an Airbnb host would be an understatement. Who doesn’t get excited when booking payments are being processed straight to your account, right?

With the help of Airbnb and other short-term rental booking sites, homeowners don’t need to stress themselves with processing payments since these platforms handle it for their utmost convenience. In this guide, we will tackle everything you need to know about Airbnb’s online payment processes and other pieces of information you need to be familiar with as you embark on your Airbnb host journey.

What is the Airbnb host payment method?

If you’re new to Airbnb, you need to be aware that the platform has a specific system that expedites all payments for both hosts and guests. This host payment procedure grants hosts to choose their preferred payout method/s and then automates the selected method.

It is essential FOR GUESTS to arrange all transactions within this payment system – if it’s outside the site (e.g. a wire or bank transfer), this circumstance may fall under a fraudulent reservation and a breach of Airbnb’s Terms of Service.

If you’re suspicious of the host or need some help, contact Airbnb Support to be assisted immediately.

Stages of Airbnb payout process

There are stages of payout process that hosts need to be familiar with to plot their finances accordingly depending on the payout method they choose.

Stage #1: Selecting a payout method.

In Airbnb, there are 5 standard payout methods that hosts can take advantage of. You can have multiple methods which include:

1. ACH/Direct Deposit

An In depth Guide on How Airbnb Payments Work
  • Make sure your checkbook is accessible for you to provide your accurate routing or account number.
  • When making a direct deposit, you have to enter your routing number. Double-check that you don’t enter an international wires number.
  • To confirm that your account is ready, it is advisable to wait for a small deposit.
  1. Bank Transfer or International Wire
An In depth Guide on How Airbnb Payments Work
  • You have to enter your IBAN or account number depending on the exact location you’re from.
  • Your financial institution can provide you the much-needed information/details.
  • Bank charges may apply.
  1. PayPal
An In depth Guide on How Airbnb Payments Work
  • Register to PayPal and have your account activated first before adding it as an Airbnb payout method.
  • Your valid email address will be used as your PayPal account.
  1. Western Union
An In depth Guide on How Airbnb Payments Work
  • Must enter full name (first name, middle initial, surname) as mentioned in your official ID.
  • Transactions fees may apply.
  1. Payoneer Prepaid Debit Card
An In depth Guide on How Airbnb Payments Work
  • Payoneer requires you to provide your official ID name to create an account.
  • Your account needs to be approved first as well as the information you filled out before you start receiving payments.
Adding a Payout Method

The abovementioned payout methods may work for you but not for some countries or regions. Airbnb has an option wherein you can select a method that serves your specific location.

For you to set up a payment method, you need to:

  1. Go to Account (profile photo in the top right corner).
  2. Click or tap Payments and payouts.
  3. Click or tap the Payouts tab.
  4. Click or tap Add payment method and choose your billing country/region to view payout methods available to you.
  5. Choose the type of payout method you want to use, and click or tap Next to add the info needed.

If you have successfully set up a payout method, booking payments will now be released for processing. For transparency, you can check the status of your payouts anytime from your transaction history.

Routing Rules

When you use routing rules, it will let you split payments and allocate them into different payout methods you set up on your account. If you wish to add a routing rule, you need to:

  1. Go to Account (profile photo in the top right corner).
  2. Make sure that you have set up more than one payout method.
  3. After you click Payout preferences, scroll down and click Payout Routing Rules.
  4. Click or tap the Add payout routing rule button.


Note that when setting up a routing rule, only reservations after the rule has been added will be affected and not applicable for those bookings which have been reserved before. Also, each payout method you set up can be assigned to only one taxpayer.

Stage #2: Guest will pay Airbnb using the card on file to book the place.

Guests are charged for the full amount when they book a reservation on Airbnb. Payments will be outlined when the host accepts the reservation made and the total amount will be charged to the card on file placed by the guest.

An In depth Guide on How Airbnb Payments Work

Stage #3: Airbnb will then calculate the potential payout.

When the host accepts the reservation, Airbnb will automatically calculate your potential earning for that specific booking. Here’s an example:

An In depth Guide on How Airbnb Payments Work

As per The Airbnb Hosting’s article, the total payout is taken from the Subtotal:

  • Subtotal = Nightly rate x Number of nights + Extra guest fee (if a host will set up a charge) + Cleaning fee

Using the screenshot above, the nightly rate is $150 which is multiplied by 13 nights plus the cleaning fee ($70) and the service fee Airbnb imposes to every host which is only 3%, unlike the fee they take from guests which range from 0-20%.

Following the example, the service fee is $285 with a total of $2,426 for this booking reservation.

Stage #4: Airbnb will release the payment after the guests arrive at their expected check-in date

Airbnb will then hold that amount until 24 hours after their expected arrival and that’s the time Airbnb releases the money and pays the host.

If guests are staying for more than 28 nights, hosts will be paid on a monthly basis.

In instances where a host is new to Airbnb and receives his first payout, it may take 30 days to pay the host.

Stage #5: Hosts will now receive the payment.

By this time, funds from your bookings will be transferred to your preferred payout method. Note that many banking systems don’t process transactions on holidays and weekends so expect that will be processed until the next week.

The standard processing time for each payout method are as follows:

Automated Clearing House (ACH)/Direct DepositUp to 3 business days
Bank Transfer or International WireUp to 3-7 business days
PayPalWithin 1 business day
Western Union1 business day (US Pacific time)
Payoneer Prepaid Debit CardWithin 1 business day

Payment method for guests

When guests book a place on Airbnb, all payments are charged to the card which guests store in their accounts. Accepted payments include Visa, MasterCard, Amex, Discover, and JCB. There are circumstances where you can use your debit card as a substitute for credit card payment as long as it has the Visa or MasterCard logo.

An In depth Guide on How Airbnb Payments Work

Other payment options may depend on the country or region where the property is located. These payment options can be viewed once the guest will be redirected to the checkout page.

Airbnb taxes, service fees, and security deposit

Taxes

VAT (Value Added Tax), or your local taxes, may vary based on your location or where you are running your business. It is essential to know these taxes and luckily, Airbnb helps you work on these details by collecting the necessary information and simply walking you through the process.

Service Fees

Most hosts pay a service fee of 3% to help Airbnb run smoothly but typically, this percentage is the charge when every booking is confirmed from an Airbnb host. This fee is computed from the booking subtotal. You can also check the transaction history because services fees depend on the formula stated earlier. and is automatically deducted from the host payout.

Security Deposit

An In depth Guide on How Airbnb Payments Work

Basing the Airbnb article, two security deposits can be issued to guests. They are the:

  1. Airbnb-required security deposit

An authorization hold will be placed on your payment method that will depend on your total credit limit. The payment method will not be charged, but the hold means certain funds cannot be accessed until the hold is released.

Your financial institution may take 3-12 business days to process the release of funds. If you have no sufficient funds for the security deposit amount, an email will be sent to you and you will be given 12 hours to try an alternative payment method.             

  1. Host-required security deposit

For hosts to secure their property, some of them require a security deposit that ranges from $100 to $5,000 and not mandated by Airbnb. Guests will be charged if a host requests to collect on that security deposit. The cost may depend on what was damaged, and the request may be lower or higher than the security deposit imposed.

This guide is meant for Airbnb hosts who are new and intimidated by how the Airbnb payment process works. It can be hard to digest at first, but if you get the hang of it, surely it’ll be easier for you to calculate and manage the process at your fingertips. If you need assistance with hosting management, You can reach us at 1-888-538-7769 or e-mail your queries at marketing@prowessproperty.ca.

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