5 Quick Tips to Attract Travelers to Your Tour or Activity Business
In the US, 81% of travel expenses are paid for with credit cards, making travel the most common credit card expense.
So it’s obvious that processing online credit card payments is a must-have for tour operators. But before you sign up with the first merchant account provider you see, let’s discuss what you should know.
What is a merchant account?
Put simply, a merchant account links a customer’s credit account to your business’ bank account. This will let you accept debit and credit card payments.
To automatically process credit card payments online, businesses need:
- A secure server with PCI compliance certification. Use SSL encryption so the data is protected.
- An order form on a secure server. This is where your customers will type in their banking information.
- A payment gateway. This works with the merchant account to make sure your customers’ information gets processed so that you can get paid.
Merchant account providers should handle the above for you. Compliance is the biggest issue, so ask your potential vendor how they will help you achieve this.
What costs should you be aware of?
Unfortunately, they’re not exactly cheap. There are lots of rates and fees to be aware of:
- Application fee. Your application may be rejected, but you have to pay a standard application fee, and may even have to provide a copy of your business license, P&L statements, tax return copies, and a photo of your office.
- Per transaction fees (for example, 50 cents per transaction).
- Monthly minimums. Vendors usually have a minimum fee that is charged if a certain amount of money isn’t processed. They may also charge annual fees like this.
- Discount rate. This includes fees, dues, assessments, markups and network charges that merchants must pay for accepting card payments. They are usually between 2 and 3% of every sale.
- Chargebacks. It’s expensive to process these, so your provider will pass the charges onto your business (it can range from several dollars or more). These are usually charged per occurrence.
Some things might influence your discount rate and fees:
- The length of time you’ve been in business,
- Your personal credit rating,
- The percentage of sales that are made on the phone or internet,
- The type of business you’re in,
- The total amount of sales per month,
- The average dollar amount of each sales transaction, and
- Service fees tacked on by third party providers.
What options do you have?
1. Banks
Although banks do provide merchant accounts, they are highly regulated and generally unhelpful for tour operators who are just starting out. This is because banks will either reject or charge a higher fee for businesses with high possibility for returns and refunds. If this is a common occurrence for your tour or activity, we highly suggest that you go with deferred payment processing instead of a merchant account.
2. Credit card companies
Small businesses usually get their merchant account through credit card companies, and not their business bank. Credit card companies will either set up merchant account processing, or ask you to use a third party processor (this is the case for Visa and MasterCard). Some credit card processing companies require you to maintain an account in their bank before you can process cards.
3. Third parties
Small-sized businesses typically need to go through third party providers to secure the merchant account. One example is PayPal. They collect customers’ data and do all the work to process payments for your business.
The upside is the sign-up process is much easier and quicker than it is with a bank or credit card company. Also, if you’re just starting out and your sales volumes aren’t high, this option can save you money. The disadvantage is that if your sales start to grow rapidly, it will start to become very expensive.
For tour operators, directing your customers to PayPal in order to pay you is not recommended. It’s a bad experience for your customers if they have to jump through an extra hoop on a separate site just to pay you. You look unprofessional, and they may even head to one of your competitors. Instead, you could connect your PayPal account with eWay, so that the payment process is fully automated and it’s easier for your customers.
4. Deferred payment processing
If you don’t want to use a merchant account, you can use a deferred payment processing system in conjunction with your point of sales (POS) system. Rezdy Vault is one example. It’s not a payment gateway, but it provides credit card authorisation which is secure and can be used with your POS system.
In this case, the customer inputs data which you receive manually. Their data doesn’t pass through a gateway, so you can inspect all orders and connect them.
While automated credit card processing makes sense for tour operators who have a fixed availability and price, businesses with a high likelihood of cancellations due to weather – such as hot air ballooning or surfing – would be better off with deferred payment processing, which is only semi-automated.
The advantage here is there’s no additional cost because Vault stores the customer data, and then you manually process it. You can avoid the hassle of charge-backs by waiting to charge the card until you’re sure what to charge. If they don’t show up for some reason, you can easily apply your cancellation fee.
If you’re interested in testing out Rezdy Vault, take a free trial of Rezdy today. You can start taking bookings in minutes:
If you enjoyed this post, click here to subscribe to our blog.
Join over 30,000 tour and activity professionals on Rezdy
Simon has over 15 years’ experience as an IT professional. He also has extensive experience in the travel industry from being an around-the-world traveller and managing a dive centre in Southeast Asia for over 3 years. Simon is now dedicated to providing the best online booking solution for tours and activities operators; he is the brains behind Rezdy.Outside office hours Simon is a true activity addict – mountain biking, sailing, swimming, beach volleyball – just to name a few. But most of all he loves diving in Australian waters.