Merchant accounts are very important in the travel industry since people generally have to make cashless transactions. Obtaining a travel merchant account will greatly boost your business.
There are lots of credit card processors, but finding one willing to provide a travel merchant account is a challenge. This guide will help you locate and successfully apply for a travel merchant account.
Find a Suitable Credit Card Processor
The travel industry is generally considered high risk. This discourages many sponsor banks from including them in their underwriting guidelines.
The main risks in this industry are the high chargebacks, the high amounts of refunds and the high volumes. Finding a suitable credit card processor isn’t impossible, but it’s definitely more challenging.
Popular credit card processors such as MyPaymentSavvy will need to know how long you’ve been in the travel industry and your credit history. Of course, more experienced business people will know how to avert risks and are also better placed to avoid fraud.
Previous Merchant Accounts
Before obtaining a travel merchant account, you may need to inform your credit card provider of any merchant accounts you’ve had before. A previous travel merchant account is a good indicator of your capacity to maintain a new one.
Unfortunately, if your last travel merchant account was terminated because of defaulted payments, you may be unable to open a new account with favorable terms.
That being said, if you’ve to pay extra fees for your travel merchant account, it would be wise to take the offer. Travel businesses always require many cashless payment options.
A merchant account will play a big role in boosting the success of your business.
Business Financials
Credit card processors are never willing to work with companies that have poor business financials. Your business should have a stable track record as this will appear less risky to the credit card processor.
If you operate a startup, there will obviously be a smaller record for the processor to consider. Also, such companies are not cash rich.
In such cases, the processor will mainly consider the board of investors. If you have significant investors, the processor is likely to consider working with you, although the merchant account is likely to be offered at unfavorable rates.
Direct Application vs. Applying Through an Approved Trust Account Model
You can apply for your merchant account directly or through an approved trust account model. If you choose to apply directly, you will probably need additional security such as deposits and bonds that equal the percentage of your peak turnover.
They might also need personal guarantees and rolling reserves.Trust accounts have mechanisms in place to protect the travel agent against failure.
This results in lower risk for the merchant account provider. As such, people who apply for merchant accounts through trust accounts have higher chances of getting approved.
Also, going through a trust account rarely requires extra security measures such as personal guarantees.
With this information, you should be able to get a travel merchant account. If you already have a travel merchant account, it’s important to manage it well since your record will determine whether or not you will be eligible for another account in future.
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