Consider becoming a credit card merchant

The following is the first of a two-part series on credit cards and the agency business. The second will appear Dec. 7.

Only a few years ago, becoming a credit card merchant was unusual for travel agencies. The commission cuts and initiation of service fees have changed this situation.

And the most recent commission caps, on international air fares, make it likely that many more retailers will be considering whether or not to become credit card merchants. The reason, of course, is that agencies that assess service fees need a way to bill customers who were accustomed to paying by credit card.

Today, several trade groups offer acceptance programs, and ARC's program allows travel agencies to run their service charges through the settlement plan as MCOs.

Why be a merchant? There are several good reasons to consider becoming a credit card merchant. Here are a few of the most common:

1. As noted, if you collect service fees, you'll need a way to bill for these. It isn't practical to have a customer pay for an airline ticket with a credit card and then write a check or pay cash for the fee separately.

2. It is inexpensive and efficient for collecting fees. There is very little cost for processing charges and it's an easy process once you're set up. The card issuer's fee is applicable only to the portion of the collection that is the service fee, not on the product price -- which includes your commissions. For example, for a $15 ticketing fee, you pay 38 to 52 cents on the transaction.

3. This allows you to accept cards for your own group or individual package tours. If you set up inclusive tours by combining air tickets and ground arrangements into a package with one price, it will be more convenient for your customers (and more marketable for you) if they can pay for the entire trip as one credit card charge. Otherwise, you'd have to break up the services, including the profit the agency made on the package.

Chances are your agency will benefit by becoming a merchant even if you process a card charge infrequently.

Becoming a merchant

If you've inquired with your local bank about being a merchant, you may have found that some prejudice exists against travel agencies. Historically, the companies that applied for merchant agreements calling themselves "travel operators" were less than reputable telemarketing firms and not retail agencies. Because of the few shady marketers, many credit card processors have denied "travel agencies" as customers. This is changing as more and more legitimate agencies are becoming merchants.

There are several convenient ways to become a credit card merchant or to function as one for the purposes of collecting service fees:

1. ARC has agreements in place with every major credit card company. By completing a Memorandum of Agreement (MOA) you can function as a merchant although you do not have your own merchant number. The ARC program is only for agency service fee charges, not vendor products such as tours or consolidator tickets. You can fax a request for information to (703) 816-5100.

2. As a member of ASTA, you are eligible to become a merchant through Chase Merchant Services. The program allows you to accept credit cards for your service fees plus all travel-related products. Its rates are in line with those of its competitors. It offers approval within 10 business days. To sign up, call Chase Merchant Services at (800) 836-2723.

3. ARTA offers the Merchant Bankcard Program to members for credit card processing. It also has check guarantee, debit card and merchant club programs. Contact ARTA at (606) 263-1194.

4. Some agents have found it beneficial to develop merchant programs with their local bank. Check your local bank to see if it handles travel agencies.

Other processing firms are also available. However, be sure to research them carefully, as they are not all equal. Your best bet is to use a firm that has the endorsement of a travel trade association.

(See the sidebar below to compare the ASTA, ARTA and ARC programs and to compare them with other sources.

Dan McManus operates the McManus Group in Sapulpa, Okla., which specializes in providing business advice to travel agencies through publications and seminars.

Mo. retailer takes plastic -- sometimes

Brentwood Travel, an $11 million to $12 million agency with locations in Brentwood and Chesterfield, Mo., has been a credit card merchant since well before the first airline commission caps. Stephanie Turner, president, said the agency became a merchant because it had a wholesale business, "and that opened the door for us."

The ability to accept the cards has evolved into a handy tool for retail, too. For example, when the agency handles groups and thus sells products provided by suppliers at net, it can take payment with credit cards and cover the card fee in its markup to the client, Turner said. The same applies when selling consolidator fares.

For other products, her preference is to request a check if the supplier does not take cards. If the customer wants to use a card, Turner said the agency's willingness to agree depends on the value of the business in question and whether the agency is getting something more than a standard 10%.

Turner said her agency had no trouble persuading its bank to make Brentwood Travel a credit card merchant although other agents around the country have faced rejection as "too small" or "too risky." She believes the crucial difference is having a good relationship with one's bank and, maybe, the size of the agency as well as the size of the bank: That is, a small agency may have better luck if dealing with a smaller bank.

There is one final twist in the Brentwood story: For the small service charges, Turner said, it was simpler to join the Airlines Reporting Corp. program for processing and collection.

Which is the best route for you?

Among the programs outlined in the sidebar below, ARC's is the most convenient. However, you pay a higher rate: 3.5% compared with 2% to 3% in the ASTA or ARTA program. But with ARC, you don't need any processing equipment as processing is handled through your CRS. If you process only service fees, the difference between the two rates isn't significant, making ARC a better option because you don't have to make an investment in equipment.

If you process more than a few hundred dollars in charges per month and/or accept credit cards for items other than service fees, the ASTA and ARTA programs offer a better value.

Compare the ASTA, ARTA and ARC programs

ASTA

ARTA

ARC