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Security Deposits vs. Damage Protection


Security Deposits vs. Damage Protection: What You Need to Know

When it comes to protecting your property, you’ve got two main options: collecting a security deposit or using a damage protection plan. While both get the job done, we recommend going with damage protection. Here’s why.

The Case for Damage Protection Plans

Damage protection plans, like the ones offered through Guesty (or your PMS), are an easy way to protect your property without slowing down your bookings. Instead of holding a chunk of money upfront, these plans charge a small fee per reservation.

You can pass that fee directly to your guests.

  • Why it Works Better: Guests aren’t scared off by high upfront costs like they might be with a security deposit. This makes it more likely they’ll complete the booking.
  • Coverage You Can Count On: Plans often cover more than the average deposit would—ranging from $3,000 to $20,000 in some cases.
  • Less Hassle for You: No need to monitor deposits, process refunds, or chase down payments for damages.

With damage protection, you’re simplifying things for both you and your guests while keeping your property covered.

Why Security Deposits Aren’t Ideal

If you’re still thinking about a security deposit, here’s how it works:

When a guest books, you place a hold on their card automatically within your payment processor (let’s say $500). That hold stays until after check-out. Once you confirm there’s no damage, the funds are released automatically — or earlier if you process it manually.

While this sounds straightforward, there are some clear downsides:

  • Not Available on Airbnb: Airbnb doesn’t allow hosts to collect security deposits directly. This makes it less flexible if you list on multiple platforms.
  • Booking Friction: High deposits can make guests hesitate or even abandon the booking process altogether.
  • Extra Admin Work: You’ll need to track holds, release funds, and manually process charges for damages.
  • Potential for Conflict: Disputes can arise if a guest disagrees with a charge, which can lead to negative experiences or reviews.

In short, security deposits can work, but they add a layer of complexity that most hosts don’t need—especially if Airbnb is a key platform for your bookings.

Our Recommendation

We recommend using Guesty (or your PMS) damage protection plans. They’re simpler, more guest-friendly, and ultimately better for your bottom line. Plus, you can pass the cost to your guests, so it doesn’t cut into your revenue.

If you have any questions about setting up damage protection in Guesty (or your PMS) or need help deciding what’s best for your property, reach out—we’re here to help!