Should I charge a damage fee to the card on file or sue instead?

Charging the card is faster, and speed is not free. The authorisation you hold is only as broad as what the guest actually agreed to, so a charge outside that scope is contestable from the moment you make it. Even inside it, the guest retains a dispute right with their issuer, and a damage charge levied after checkout is close to a textbook trigger. If they dispute and win, you are back at zero with a chargeback fee added, and you have spent the goodwill you would have needed to settle. That risk scales with the amount, which is why the calculation differs for a $200 charge and a $2,800 one.

The rule of thumb is to match the tool to the strength of your paperwork. A modest amount within a clearly signed damage authorisation, backed by photographs, is a reasonable card charge, because a guest who disputes it will lose the representment. A large amount, a thin authorisation, or contactless check-in with nothing signed points to court, where the judgment cannot be reversed by a bank. Whichever you choose, do not run both on the same money. If you charge and it sticks, there is nothing left to claim, and if you charge and it reverses, file for what remains.