Understanding the risks of accepting third-party credit cards

As credit cards have become the go-to form of payment for the majority of travel purchases, travel retailers and wholesalers must remain diligent in their credit card acceptance practices.

Accepting third-party credit cards, where the card doesn’t belong to one of the travellers, can be a risk.

According to a recent survey conducted on behalf of the Chartered Professional Accountants of Canada, 21% of Canadians have been affected by credit card fraud. According to TransUnion, a credit reporting organization, 3% of all consumer transactions originating from Canada in 2022 were suspected to be fraudulent, compared to 2% in 2019.

To minimize risk, registrants should prioritize processes that verify the authenticity of credit card payments, including cross-checking the Card Verification Value (CVV) and expiration date.

Under Ontario Regulation 26/05, if a credit card payment is accepted without following due process, it is a business risk that is NOT covered by the Compensation Fund.

Additionally, any credit card payments accepted for a booking must be applied to that booking. The legislation prohibits funds from being applied to unrelated bookings.

For retailers, if you are the credit card merchant (not a flow-through transaction), you take on added business risk associated with accepting a third-party credit card. This can include being subject to chargebacks and being liable for those payments.

For wholesalers, if you are receiving an elevated level of charge backs associated with a particular travel retailer, and choose to no longer do business with that retailer, you must report it to TICO (Ontario Regulation 26/05 Sec. 21).

Ultimately, it’s crucial for all parties involved to exercise careful and responsible monitoring when it comes to the use of third-party credit cards. Vigilance in handling these transactions ensures a secure and trusted travel marketplace.