by Ben Dwyer When most people think of “high risk” credit card processing, they think of gambling, firearms, tobacco, and similar industries. But travel agencies also typically fall under “high risk.”
One reason for that is the higher-than-average chargeback rates that can come from bookings for a future trip that a client later wants to cancel. Not to worry. Even as a high risk business, it’s still possible to secure a merchant account to accept credit cards. Here’s what you need to know as an agency, tour operator, cruise business, or other travel company.
Why is travel a high-risk industry?
Primarily, chargebacks. Travel is a business where your customers pay in advance for a service that happens in the future. (Sometimes well into the future – trips could be months down the road.)
Unfortunately, life gets in the way, and a customer may decide to cancel a trip. But you’ve already put work into booking the trip and setting an itinerary; that’s why you require deposits or impose a no-refunds policy. Disgruntled customers will often skirt that, filing a chargeback with their card company.
Credit card processors are leery of high chargebacks as it leaves them at greater risk of losing money.
Travel Agent Merchant Accounts
Travel agencies can accept credit cards online, in person, or over the phone. You can also combine methods, if you’d like. Customers could pay a deposit in person, and then pay their final balance online prior to their trip.
Regardless of the payment method you choose, securing a merchant account as a travel agent means locating a credit card processor that can explicitly support your business type. It won’t do you any good to fudge the details to try to get an account with a processor that doesn’t support travel businesses. At some point, the processor will catch on and shut down your account. This is particularly likely with processors that offer “same day” card acceptance where you can apply and start processing very quickly. In those cases, the processor will review your application in more detail later, often realizing that they can’t support your business. Save yourself the headaches and choose a travel-friendly merchant processor from the start.
Solo Travel Agents
If you’re a one-person shop, it may be tempting to look at the quick and easy “flat rate” processing solutions: companies like Stripe or Square. However, Stripe’s prohibited business list explicitly references both travel reservation assistance and cruises. Square more generally just lists “high risk” businesses, giving it broad discretion to deny anything it feels is too risky.
But there are still options for small businesses and solo travel agents. You can sign up with the same high risk processors as the bigger players, and choose to utilize smartphone card readers or virtual terminals if you don’t need or want fancy equipment.
Limiting Chargebacks
Keeping chargebacks as low as possible will be vital to keeping your merchant account in good standing. While every business has some unavoidable chargebacks, there are steps you can take to limit the number of them that you receive.
To do so, be sure to implement clear policies regarding payment, but consider offering refunds in some situations. You may also wish to work with a chargeback management company to help you fight the chargebacks you feel are illegitimate.
Implement Clear Payment Policies
On your website or brochures, clearly spell out requirements for deposits and full payment. List any timeframes for full refunds, partial refunds, or the ability to apply a deposit to a future trip. Don’t hide cancellation or refund policies in small print. It’s critical that clients know how (and when) they need to cancel. If you can offer alternatives to no-refunds, that’s a great option as well.
Consider Refunds
One thing to keep in mind is that even if you win a chargeback, it still counts toward your chargeback ratio. If you get too many chargebacks, even successful ones, your processor can shut down your account. A rough rule of thumb is that chargebacks should be below 1%.
In some cases, it may be worth it to skip the chargeback fight and issue a refund to a customer who asks. Alternately, some customers may be willing to apply a deposit to a different trip rather than take a refund or initiate a chargeback. Bottom line, if you can work with your customer to avoid a chargeback, that’s the best route to take.
Work with a Chargeback Management Company
Chargeback management companies are exactly what they sound like: businesses that work with you to manage your chargebacks. They’ll help you provide supporting evidence to fight a claim and can keep you updated on the status of chargebacks.
If you anticipate a lot of chargebacks, are uncertain about the dispute process, or just don’t have the time to attend to your chargebacks individually, a chargeback management company can be a good solution. However, keep in mind that you aren’t guaranteed to win disputes just because you’re working with a specialty chargeback company. Additionally, as noted, even if you do win, any chargeback counts against you in the eyes of processors. Be sure to look at the outcomes and the costs for the company so you can determine if it’s a cost-effective solution for you, but also consider how many chargebacks you’re getting. If it starts creeping up too high, you may need to think of alternatives to bring it back down so you don’t lose your merchant account.
Find a Credit Card Processor
Fortunately, travel agencies aren’t the most difficult high risk business to place with a processor. You’ll be able to request quotes from multiple companies to compare rates and fees. However, it’s still a good idea to consider high risk processors.
You can browse CardFellow’s processor directory to locate high risk processors or try our high risk credit card processing quote tool.
Note that just because a company can support high risk doesn’t mean they’ll offer merchant accounts to every high risk business. However, it does dramatically ease the process of securing a merchant account as a high risk company.
Once you’ve located the company or companies you’re interested in, you can request quotes and compare costs to find the right solution for your needs. When you’re ready to actually apply for an account with a company, you’ll need to provide various documents. These include bank or financial statements, prior processing statements (if you’re already processing), ID, etc.
Remember to disclose the nature of your business upfront. You don’t want to waste your time talking to a processor only to later learn that they cannot support travel businesses.
