NastyMcT : Alaskan Blogger

Just a post, to let everyone interested know, that only ONE of the three Orbitz charges have dropped off my account, the other two after FOUR DAYS, are still pending. STILL PENDING. This is a soft hold?!?

You may have recently heard about various airlines filing for Chapter 11 bankruptcy (Frontier on 4/10/2008) and this is why…. Credit Card processors get very nervous when there chargebacks, which is exactly what I had to do. Trying to resolve it through Orbitz didn’t work, so I had to call my bank and dispute the charges.

In a normal credit card/bank card situation, you authorize the charge, let’s say on Monday, and Wednesday of that week it’s usually deposited in the bank account of the company you made the purchase from. 2-3% of your transaction will go to credit card processing fees. That 2-3% (possibly more for high risk businesses) get divided between the issuing bank, VISA/MASTERCARD, the processor, and if it’s a co-branded card, that company gets a little slice of the pie too.

Now if you own a high-risk business, or one with a lot of chargebacks, you may find that your credit card processor will hold those funds for X number of days, so that they’re protected from losing money. ALL smaller Credit Card Processors, are working with and underwritten by a bank. So essentially, they are middle men. Making a small percentage off every transaction processed.

Depending on the setup, fees are deducted DAILY or MONTHLY. So for example, for simplicity, you buy a moon pie for $1 and use your credit card. DAILY merchants would have .97 deposited in their account. MONTHLY merchants would have $1 deposited into their account, and at the end of the month, .03 would be withdrawn for the fees. Daily is preferred by the processing companies, because there is less of a risk for them. They get their cut right off the top. If they collect the fees from the merchant monthly, it’s a higher risk for the processor, because potentially, the business could accept a bunch of credit card payments, and then shut their doors, and their checking account. So when the processor tries to withdraw the total fees at the end of the month, no go! The middle man processor still has to pay these fees, so it’s a loss to them.

Now, many people don’t realize, merchants pay the 2-3% for charges AND CREDITS given to customers. So you get home, moon pie is moldy, you return it and want a refund. The merchant can run a CREDIT for $1, and you guessed it, still gets charged .03!! So now the merchant has a moldy moon pie, and he’s out .06 total. Mind boggling isn’t it?

Why am I droning on and on about this? Back to the Chapter 11 airline stories.

So what’s happening, is the credit card processors for the airlines, are basically saying “Look, we’re going to hold your money for 10 days instead of depositing it straight into your account after 2 days, because you have a lot of chargebacks and refunds.”

This really messes up the cash flow for a business, especially for businesses that rely almost SOLELY on credit card processing to get paid from customers. The banks and processors are holding up their money. Just apply this theory in your own life, if you get paid on the 1st, but there’s a 10 day hold before it can access the money, how would that affect you?

Here is the story on Frontier from msnbc.com http://www.msnbc.msn.com/id/24061790/.

I’m on the fence about this issue actually. In one sense, I’m rooting for the credit card processing companies… However, I’m not happy that banks can just decide to do whatever they want, and cripple the airlines in the process. Unfortunately, the airlines are suffering, and it’s partly due to unfair business practices of these online con artists, SOFT holding the consumers money for products (tickets) never confirmed.

I will mention, I’ve never had any problems when dealing and purchasing tickets from airlines directly. But in today’s modern world, it’s more convenient to search one site, as opposed to 15 different airlines sites for tickets. :::sigh:::

I’ll let you know when they finally release the money!! I do want to write Orbitz credit card processing company a letter… if anyone knows the name of that company… let me know!

Laura