What is a Credit Card Chargeback and How Should Travel Agents Deal With It?

Everyone has the right to dispute a charge made to their credit card. But when a credit card chargeback happens to you or the supplier who worked with you on that client’s trip, it can impact the bottom line of your travel agency.

As a travel advisor, you should be aware of the risks associated with payment card acceptance and the credit card chargeback management process. By understanding the ins and outs of these processes, you can protect your business from financial losses and ensure that your customers have a positive experience when booking goods or services through you.

In this post, we’ll provide an overview of payment card acceptance, risk mitigation, and chargeback management. We’ll also discuss some tips for avoiding chargebacks and minimizing the impact of chargeback risks.

Whether you are new to the industry or a seasoned expert, this valuable information will help protect you, your agency and your valued suppliers:

  1. Develop a best-practice mindset for procedures involving card payment acceptance for your product or service, including cardholder data handling and collection.
  2. Discover how to become an informed decision-maker about payment acceptance, fraud, and the entire chargeback process.
  3. Learn how to respond to and manage chargebacks.

Let’s explore how you can manage the risks associated with credit card information and how you should respond to a chargeback.

What Are Credit Card Chargebacks?

The travel industry is increasingly reliant on credit cards as a primary method of booking and paying for travel. According to a report by the World Travel & Tourism Council, credit and debit cards accounted for almost 50 percent of all travel bookings in 2021. With this shift comes an increased risk of fraud and chargebacks for travel agencies. Chargebacks are a form of customer protection that allows cardholders to dispute a transaction and request a refund from the merchant. Credit card chargebacks happen when a customer disputes a charge with the card issuer. Usually, the customer is seeking a refund for a purchase of a product or service.

According to the ARC Guide for travel advisors, “Under the Fair Credit Billing Act (FCBA), consumers in the United States are protected against ‘inaccurate and unfair credit billing and credit card practices.'” This means, that if someone suspects their card information was stolen and used to book travel through you, the cardholder can initiate a chargeback with the credit card issuer to get a refund. Generally, the cardholder will contact the bank or credit card company to open a dispute over the charges. To figure out the issue, that institution will then directly contact the merchant who withdrew the money charged.

While chargebacks can be used legitimately, they also can be initiated fraudulently with the intention of getting free travel or services. This practice is known as friendly fraud. Friendly fraud occurs when a customer makes a purchase with a debit or credit card and then disputes the charge with their bank, despite the fact that they don’t have a legitimate reason to do so.

Chargebacks: Potential, Process, & Prevention

credit card authorization form for credit card chargeback

What are some common reasons a client may request a chargeback?

Unrecognizable Business Name

Often legitimate purchases are mistaken for fraud because a cardholder’s bank doesn’t recognize a service provider or merchant as a real business. The bank may freeze a client’s account until the purchase is verified. If this happens, you can notify your client that the purchase is on hold.

Dissatisfaction with a Service

Cardholders who are not satisfied with services they’ve received may dispute a travel purchase. Although it would be hard for you to retroactively prove that your service was excellent, you can establish and follow several simple rules for providing satisfactory service to your clients:

●      Communicate, communicate, communicate. Keep your clients informed about all risks and opportunities associated with their travel plans so they will be prepared, should obstacles occur or changes be required. And always respond to problems and client questions promptly.

●      Keep it real! Ensure your clients have realistic expectations about their travel plans, destinations, and options.

●      Be proactive. Don’t just wait until a bad thing happens to implement a plan. Think ahead of all the things that could go wrong and implement a risk-management program that will effectively limit your exposure to chargeback losses!


Credit card fraud occurs when a card or card information is stolen and used without the cardholder’s knowledge. For example, a credit card holder notices an unauthorized transaction on their bank account. They contact the bank and learn that someone has fraudulently purchased a safari package from your travel agency with their stolen card. They file a dispute to get their money back and their bank contacts the supplier of the disputed purchase. Cardholders must provide proof that they either did not make the purchase or did not receive the services they paid for. Sometimes the supplier will contact you for this information.

Confronting the Risks of Credit Card Chargebacks

Here are a few things you can do to prevent chargebacks and protect yourself from chargeback risks:

  1. Make sure you are aware of the signs of fraud so you can identify suspicious behavior. This includes things like last-minute purchases of goods and services, multiple bookings with different credit cards, or bookings that don’t match the traveler’s identification documents. It’s always wise to ask customers to provide additional identification when making a booking.
  2. Educate yourself on best practices for payment card acceptance, including handling and storing credit card information. This includes collecting the cardholder’s name, billing address, and phone number at the time of booking.
  3. Obtain a signed credit card authorization form, along with signed client terms and conditions.  If a cardholder disputes a charge, this documentation will help prove that the cardholder authorized the charge and agreed to your terms of service. Suppliers often ask you for this information. By following the strict rules of authorization, you could potentially save your suppliers and yourself unneeded stress, minimize the risk of chargebacks, and keep your business running smoothly.
  4. Document everything meticulously. A solid documentation process is an excellent risk mitigation tool!
  5. Know your clients – how they think, act, and talk. Does this individual seem a little fishy? Does the credit card information match the name the client gave you? You, as a business owner have the right to refuse service to someone you aren’t comfortable doing business with.
  6. Because the liability of a purchase falls on your supplier and subsequently you, many agencies use fraud management/chargeback prevention tools, such as:

●      Address Verification (AVS)

●      Card Verification Number (the three numbers on the back of a card)

●      Enhanced Payment Card Authorization

NOTE: Most purchases made through your travel agency are made with “card-not present.” This means you didn’t use a card reader or other form of payment because you don’t sell goods, like shoes or clothing. This increases your risk of fraudulent purchases. Because the liability of the purchase falls on your supplier and possibly you, many agencies find fraud management tools to be invaluable when confronting chargeback risks.

What’s Your Chargeback Response Plan?

It is critical that you stay informed on card fraud and have a credit card chargeback response plan in place. There are a few things you can do to ensure any chargebacks that do occur have a valid reason.

Experts recommend you respond to a chargeback within five days of receiving notice. This ensures you have enough time to research and respond. Then, the first course of action in any chargeback is to contact your client. Simply ask whether something is wrong. Sometimes, it’s a simple misunderstanding.

Maybe your client is a victim of fraud. Stolen credit cards are a nightmare for everyone! If you can’t reach the actual cardholder, it could be fraud and time to contact the authorities. This is an excellent time to review the chargeback prevention procedures we discussed earlier!

We’ve all experienced difficult people. When such a customer opens a chargeback dispute, how will you respond? Did the customer take the trip and receive the services you booked? If so, your documentation (including a signed “Terms & Conditions”) will defend your agency.

Sometimes, a client may think there were duplicate billings and request a chargeback. In this case, go back and review tickets and/or bookings made. Correct the billing error or, if the transactions were legitimate, send supportive documentation to the correct sources.

As stated earlier, one of the best ways to avoid unpleasant chargeback issues is to be proactive and put in place documents (like “Terms & Conditions” and a credit card authorization), systems, and processes to minimize your risks and to help you quickly resolve any disputes.

Cover All Your Bases!

Travel Industry Solutions (TIS) offers legal contracts to help travel agents mitigate risk and credit card chargebacks. When you become a TIS member, you’ll gain access to warrantied contracts and waivers, as well as countless forms, tools, and other resources designed to protect and advance your travel business.

Join now to bring everything you need for success to your fingertips!

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