The downside is that I haven't heard of "security deposits" performed within the web hosting industry. I am afraid such practice will drive most away, not just leechers. It really is makes little difference whether you place a security deposit up front or place fees to be charged for various violations in your Terms of Service during sign-up - they would still authorize you to charge them.

I think if you plan on running a serious shop, establishing pricing that is right for you or your client demographic is the best protection you can create. Those who consider the pricing too low will automatically move away, while everyone else will understand that good service costs more.

Best,