There’s few things more frustrating for merchants than being told you run a “risky business”. Especially when your business practices are safe, it’s just your business type that invites suspicion. Merchants in the travel industry fall under the category of high risk most often because of their tendency to have more than average chargebacks. A high risk travel agency merchant could have many chargebacks for the following reasons:
- Card holders might cancel their trip or excursion, conflicting with your no refunds policy.
- A customer attended the vacation or event that you’ve planned for them, but they didn’t enjoy themselves as much as promised. They now want a partial or full return.
- You have planned an itinerary that includes a company that didn’t follow through on their excursion promises. If the card holder can’t get their money back with that company, they might come knocking on your door.
Rolling Reserve Percentage for Travel Agency Merchants
Although your high chargeback to transaction ratio might be of no fault of your own, credit card processors will protect themselves against it. They do this by either declining your application, or imposing restrictions on your merchant bank account. One such restriction high risk travel agency merchants know of is a rolling reserve percentage. A processor can withhold a percent of your monthly card sales from you for a time in case your sales can’t cover your monthly chargeback fees. They’ll hold it every month, but return it eventually. Know that a typical average is 5-10% of card sales withheld for usually a rolling 6 months. It’s not a situation travel agency merchants want to find themselves in due to the extreme high and low seasons of the business. In January, $100 might be withheld from your batch deposits, while $500 is held in June. There are better ways to manage your “high risk” business model without messing with your cash flow.
How a Travel Industry Business Owner Can Lower Their Risk
There are a handful of tactics you can employ to lower your chargeback percentage at your business. You could clearly explain your refund policy, or stress that all experiences in a new location are different. Those, however, only help when you’re already on the brink of getting your merchant account shut down. Here’s a few tips to consider while shopping for a merchant account, to avoid fear of cancellation before it occurs.
Accept a (Somewhat) Higher Rate
It’s tough to hear, but a high risk travel agency merchant has to bite the bullet. How much time are you willing to spend searching for a payment processor who offers unreasonably low rates? Of course, low rates should be important to you! But the kind of payment processor who grants you an account without rate strategizing is also the kind that will shut down your account without warning. Be willing to negotiate on your monthly card processing rate.
Ask Your Merchant Services Rep About Daily Discount
It is misleading that payment processors call their monthly fees “discounts”. For low risk business models, the fees or discount is usually debited at the end of the month. When a merchant services company is concerned that your business won’t have funds left at the end of the month, they might elect to charge them daily. It feels like less of a risk to them, and it’s less uncomfortable for you to say goodbye to a larger sum all at once. This is a simple trick that should leave you feeling like neither parter has the upper-hand.
Complete the Travel Industry Application with a Pro
If you had the option of going through underwriting with an experienced travel agency merchant representative, wouldn’t you? The delicate relationship between underwriter and merchant account representative is better navigated with years of experience. A great rep knows how to present your application with detailed explanation of the business model, refund policy and services you offer. Since underwriters can be picky, it’s best to have a helping hand in this process.
Very few high risk merchants have the care, time and effort afforded to them that is necessary to approve their applications. Schedule a free consultation with a representative to make sure your next try at travel agency credit card processing gets approved.
