Deposits and Prepayments: What Changes With the New Fee

A deposit and a prepayment look alike on a booking and behave nothing alike when a fee base widens. The difference decides who carries the risk.

Last updated: October 9, 2026

A deposit and a prepayment both show up as money attached to a booking, and that's where the resemblance ends. They're held for different reasons, they belong to different people at different moments, and a fee change touches one of them far more than the other. Get the two apart and you can read a booking's terms, and its risks, in one pass.

Key Takeaways

• A deposit is held, not earned. It sits against damage or a breach and goes back when the terms are met.
• A prepayment is part of the price. It's the guest paying early for the stay, and it counts as revenue when earned.
• A widened fee base usually touches the prepayment. A percentage rides on the figure that counts as price, and a deposit often sits outside it.
• Write the two apart in your terms. A guest who reads a deposit as a discount creates a refund dispute you'll have to settle.
• How each is treated depends on the platform. Check the current terms of each channel you sell on before you rely on either.

What each amount is actually for

A deposit is money set aside, not money earned. It stands against a risk: damage, extra cleaning, a missing item, a breach of the house rules. If nothing goes wrong, it goes back to the guest. If something does, part of it may cover the cost. Until then it isn't yours to spend, and it isn't income.

A prepayment is a different animal. It's part of the price of the stay, paid ahead of time. The guest is settling an amount they already owe, just earlier than arrival. Once the stay is delivered, it's revenue like any other part of the price.

The confusion comes from the fact that both reduce what's outstanding and both move money before the stay. On a booking summary, two figures can sit side by side with similar labels and no clue about which is which.

Add similar labels on a booking summary and the two can read as variants of one thing. They aren't. A deposit that gets mistaken for a prepayment sets an expectation the guest will hold you to, and unwinding that expectation costs more than naming the two correctly in the first place.

Here's a scenario that shows the gap. A guest pays an advance amount for the stay and a separate amount is held against damage. On the booking both reduce what's due. But one is a payment for the stay and the other is a hold against a risk, and the difference only becomes visible when something has to be returned, charged, or counted.

It helps to ask who holds the money in the meantime. With a deposit, you're holding the guest's cash against a possible cost. With a prepayment, the guest has paid part of a price you still have to deliver. Same moment, same booking, and two completely different obligations sitting behind the two figures. Ask it on every booking until the answer is automatic.

Which one the fee base touches

When a platform takes a percentage, it takes it on a figure that counts as the price. A prepayment sits inside that figure. It's money the guest pays for the stay, so a share of it can be taken the same way as the rest of the price.

A deposit often sits outside it. It's held against a risk rather than paid for the stay, so a fee on the price tends not to apply to it. That's the general pattern, and it's the reason a widening fee base lands mainly on the prepayment side.

Which means the two behave differently the moment the base moves. Widen the base and the prepayment carries a larger share than before. The deposit, held outside the price, tends to stay where it was. Same booking, two amounts, and only one of them feels the change. How each platform applies its own rules is another matter, so read the current terms rather than assuming the pattern holds everywhere.

Timing adds a second layer. A deposit is returned after the stay once the risk has passed. A prepayment is earned as the stay is delivered. So the two amounts don't just sit in different places on the booking. They move to different people at different moments, and a fee change lands on the one still counted as price.

Writing the two apart in your terms

The fix is a sentence each. Say what each amount is for, when it's returned or applied, and what it doesn't do.

Name the deposit as a deposit and say plainly that it's held, not earned, and returned when the terms are met. Name the prepayment as part of the price and say when it's due and what it covers. Two clear sentences save a guest from guessing, and a guest who isn't guessing rarely disputes.

Put the same wording everywhere a guest meets it, not just in your terms. The booking confirmation, the check-in message and the listing details should describe the two amounts the same way. A guest who reads one version at booking and a different one at check-in will trust neither.

Keep the wording current. When a platform changes how it handles either amount, re-read your own lines and update them, because a term that no longer matches the platform's current treatment is worse than no term at all.

Test the wording on someone who hasn't seen it before. Read your two sentences to a guest, or to a co-host, and ask which amount is returned and which is kept. If the answer isn't instant, the wording is doing too little work and the booking will do more.

What to check before the next confirmation

Before the next booking is confirmed, run a short pass over both amounts.

Check that the deposit and the prepayment are labelled correctly on the booking. Check which figure the fee is taken on, and whether the current base has moved since you last looked. Check the platform's current terms for when each amount is returned or applied, since that timing decides who carries the cash risk in the meantime.

Then record it. Keep the two amounts and their treatment in one place, so the next booking of the same shape is quick to read.

A record helps in a second way. When the same two amounts appear on the next booking, you can compare the treatment rather than re-derive it. Over a season those notes show you whether the platform changed its handling, or whether you did, which is a question that's hard to answer from memory. The calendar in LOCALSBNB shows each connected channel's own source price and status, and its read-only assistant answers plain questions about booking details and business figures. You can read a booking's amounts without rebuilding the picture from memory. Start free at localsbnb.com.

FAQ

Is a deposit ever part of my revenue?

Not while it's held. It's money set aside against a risk and returned when the terms are met. It becomes yours only if the terms allow part of it to cover a cost, and only under the platform's current terms.

Does a fee change affect both amounts equally?

No, and that's the point. A percentage usually rides on the figure that counts as the price, so a prepayment feels the change more than a deposit held outside it. Check each platform's current treatment rather than assuming.

What if my terms describe the two vaguely?

Fix the wording before the next booking. Two clear sentences — what each amount is for and when it's returned — prevent the refund dispute that vague terms invite. Keep the lines current as platforms update their own treatment.

The two amounts are easy to confuse and cheap to separate. Name them clearly, keep the wording current, and check both before the next confirmation so a fee change lands on the figure you expected. Read the details of a booking in one place at localsbnb.com.

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This is general guidance for hosts, not legal, tax or insurance advice. How deposits and prepayments are handled changes by platform and by locality, so check each platform's current terms and the current position of your local authority.