But travel agents it seems are are having a hard time as their credit and debit card payment terms, have either been extended and or re -negotiated by the merchant providers.
This is because the Credit card companies are trying to reduce their exposure to bad debt.
Where previously the average turnaround for a credit or debit card payment for travel was just 3 days, from transaction to those funds arriving at the travel agents bank. Now it seems to be more like 5 to 10 days and some merchant providers want to extend this to weeks, if this happens travel agents will be in a dire situation.
Part of the problem is this :- Credit card payments. If you paid over £100 per person, per component of the holiday, under Section 75 of the Consumer Credit Act, credit card firms are jointly liable with retailers if something goes wrong. Which means you can get a full refund.
Visa debit payments. The card issuer operates a chargeback scheme, where it gets your cash back from the retailer’s bank if something goes wrong, regardless of the amount spent. This is not a legal requirement, but a customer service promise. You must notify your card company within 120 days.
For example: If you book a late travel deal and pay by credit card or debit card the travel agent will in a worst case scenario, have paid for the holiday before they get paid by the merchant services. This will cause many to reconsider if its worth carrying on..
“Travel Agents naturally need the cash flow to pay for the holiday package or seat only, but this will leave them with no cash-flow.
Since most travel agents have most of their customers using credit or debit cards, agents will lose at least 90% of their cash-flow overnight.”
Merchant account provider Streamline is understood to have suggested options that may include bringing back bonds and extending its payment terms to 42 days as it looks to reduce the credit card facilities it gives to agents.
The average payment term is currently three days, but Barclaycard Merchant Services has according to TTG – reportedly threatened to extend that to 60 days.
Alan Bowen, legal advisor to the Association of Atol Companies, said: “On the basis that companies have lead-in times of three weeks, this could delay payments until after the holiday.
Bowen said credit card companies had been discussing plans to limit their exposure for months and that the government’s decision to delay the conclusion of the Atol scheme had triggered a “renewed fear among banks that the Atol system was not going to be as robust as it could have been”.