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Advantages/Disadvantages of using the C1 Flat record
to calculate owner credit card fees. 

Added 1/23/07 - Article ID#: KB000196 

There are two ways to charge owners for credit card fees incurred by the management company.

1. Using the C1 flat record to charge a flat fee on the room revenue portion of the total charges on a paying guest reservation.  This option does not take into account the payment.  It only looks at the room revenue charges on the folio.

2. Using the credit card fee recorded on each of the credit card master records.  This option charges a fee on all credit card payments.  There is no way to differentiate when a payment is taken for room charges and when a payment is taken to pay for incidental charges.  The owner will be charged a fee for all payments received when a reservation is checked-in to the unit he/she owns. 

When considering how to charge owners for credit card fees incurred by the property, the following considerations should be taken into account:

• The C1 Flat feature evens out credit card fees to owners by basing it on actual owner revenue and not the actual credit card payment which can include miscellaneous charges for which the owner does not receive revenue.

• The C1 Flat feature allows you to take group payments on one reservation.  When using the old method, payments had to be split among all reservations so no one owner was charged the credit card fee for the entire group payment.

• The C1 Flat feature prevents the situation in which a reservation crosses months by one day and the revenue is recorded in one month and the credit card fees are recorded on the following month.

• The C1 Flat feature prevents fluctuating fees on owner statements.  The various credit card vendors may charge different fees for credit card transactions.  These fees can sometimes confuse owners.  The C1 Flat feature uses a single pre-determined percentage to charge owners a fee on all room charge transactions..

• Moving reservations between units is not an issue as this fee is based on the nightly room charges that occur in the room the reservation is checked into rather than a payment that may be taken when the reservation is in either of the units.

• The credit card fee will display in the reservation section and may be taken out of gross revenue prior to processing the management commission.

The following statements represent disadvantages of implementing the C1 Flat logic:

• The C1 Flat feature uses the same percentage no matter what type of credit card is used as a form of payment or if the payment is made with cash or a check.  RDP has analyzed data with several customers and found that more than 90 percent of all payments taken are Visa and MasterCard payments.  American express makes up a small percentage of payments as well.  In our research, we found that very few cash payments are taken to pay for room charges. 

• Credit card fees should be averaged to determine the fee percentage that will be charged to owners.

• In order to implement the C1 Flat feature, the management company may need to change the management contract with its owners.

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