Yet another smaller cruise line just filed for bankruptcy. And I said “another” because there’s been a plague of this lately. We’re seeing it with smaller cruise lines sailing out of U.S. ports, those that sail overseas, tour operators, and even riverboat cruises.
While we’re talking about companies going out of business, a number of small airlines around the world have gone bust, and frankly, there are several in the United States that are not in great financial shape. So I want to talk about a critical way to protect your money and make sure you don’t get left holding the bag if a travel company goes under.
The Red Flag: Luring You To Pay by Check or Cash
There is something they’re asking you to do that I absolutely do not want you to do.
I don’t want you being lured in by a tour operator or a cruise line saying, “Hey, you pay us by check and we’re going to give you a 5% discount, or a 7% discount, or a 3% discount,” or whatever the discount is. When the discount is significantly higher than their credit card processing costs — which for a travel supplier doing big-ticket items is usually about 1.5% — that’s a giant red flag.
If they’re suddenly offering you a 5% or 7% discount for giving them your checking account number and letting them debit the money that way (ACH), here’s what’s really going on: They may be on “credit watch” from the credit card operators.
When a customer pays in, there’s a big “hold back.” The operator on credit watch doesn’t have access to most of the money you just paid them; they only get a small portion right away.
In order to keep the ship going or the tours touring, they try to get people booking future dates to pay by checking account. They get all of that money right away.
The Distinction That Really Matters
If that airline, cruise line, tour operator, or even a vacation rental company goes bust or flies the coop, and you paid by check or direct debit, your money is gone. There is absolutely no way for you to reclaim that money. No way to do it.
There are only two possible ways you can recapture that money:
Pay by Credit Card
While not completely ironclad and foolproof, paying by credit card is often the way you get your money restored to you.
The credit card industry has a big financial incentive to give you that money back. That way, you have an extra incentive going forward to pay for travel by credit card and they keep collecting all those merchant fees. It works for both of you.
Buy True Trip Insurance That Covers Supplier Default
If you buy a policy directly from the travel supplier, it is usually not real insurance — it’s their “protection plan.” And let me tell you, you are not protected from anything if they go bust.
With real third-party trip insurance, some policies do cover the supplier going bust, but others don’t.
If protecting yourself against a tour operator or cruise line default is your main goal, you must make sure the policy covers it before you give up your period of review.
Because trip insurance is regulated by the states, you will have a look-see period (maybe 15 days or 30 days) where you can say, “Thanks, but no thanks, I want my money back for the policy.” Use that time to review the fine print! You want to make sure it covers protecting all the money you paid in from the supplier going bust.
Final Thoughts
Just be aware and be wary when somebody is dangling a little discount in front of you for paying cash. They are not being your friend in the travel business, at least not where your wallet is concerned.
