Why Travel Businesses Are Considered High-Risk

Oct 12, 2020

Travel businesses take credit card payments online or via the phone. Whichever avenue you choose, you need a merchant account from a reliable payment processing company that will stand with you throughout.

Travel-related businesses include but are not limited to the following;

  • Independent travel agents
  • Online travel reservation websites
  • Travel agencies
  • Timeshare Resellers
  • Cruise lines
  • Tour operators
  • Transportation
  • Charters
  • Ticket sales
  • Lodging

Most of these categories suffer different challenges, but early booking is undoubtedly the root of all problems.

The Primary Challenge for Travel Companies

Travel businesses take liability when clients cancel trips. It is a challenge the travel industry is yet to deal with. And when it happens, it leads to problems such as;

  • Wasted time in requesting reversal
  • Difficulties handling the logistics involved in canceling accommodations
  • Extra costs in the form of phone charges when discussing refunds
  • Liabilities when customer requesting reverse charges 

The travel agency often takes the liability of all the repercussions of a cancellation. And while consequences like time-wastage and phone charges are minor worries, chargebacks are a bone of contention because it keeps banks away from travel businesses.

Chargebacks in Travel Merchant Accounts

Many other reasons lead to a high-risk classification, as we shall see, but a high-chargeback risk is the main culprit.

Clients pay upfront for a service—sometimes, months earlier— then later realize they can no longer make the trip and must cancel despite your efforts in planning and booking. 

Even a no-refund policy or upfront-payment request can’t save you from a dissatisfied customer determined to reach the extreme of filing a chargeback claim with their card brand.

These chargebacks are the number one reason banking institutions will turn down a merchant account request for a legal travel business.

More Reasons Underwriters Consider Travel High-risk

But chargebacks are not the only red flags. Below are other reasons underwriters will turn down your travel company.

  • Travel businesses deal with high-ticket sales. When high-value tickets couple with multiple chargebacks, banks see a recipe for disaster.
  • The idea of taking payment as a third-party welcomes many risks. 
  • Huge transactions exceeding the average sale amount can raise security alarms.
  • Prolonged delivery times (the period from checkout to service delivery). Paying for a trip that’s due 2 to 3 months later gives too much room for a change in mind increases chargeback risks.

The Takeaway,

Because merchant accounts for travel are difficult to acquire, your best option lies with high-risk service providers who accept travel businesses.

You want to compare service offerings and rates among the shortlisted vendors to narrow down to the right partner.

Let us help you get a high risk merchant account today!

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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