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
- Ticket sales
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.
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.