Travel Agency Merchant Accounts: Merchant of Record, Trust Account Laws and Chargeback Exposure

A travel agency sells something it does not make. The flight belongs to an airline, the cabin to a cruise line, the room to a hotel, and the agency's job is to put them together and take payment. Who takes that payment turns out to decide almost everything about how a travel business gets underwritten: which name appears on the cardholder's statement, who answers the chargeback, who owes the refund when a supplier cancels, and, in several states, which bank account the money is legally allowed to land in.

This guide is for travel agencies, tour operators, wholesalers and online booking sites. Rules are cited as in force in October 2026.

Two ways a travel sale gets processed

Every card payment has a merchant of record, the business whose merchant account the transaction runs through and whose name the cardholder sees on their statement. The Department of Transportation's refund rule defines it in exactly those terms: the entity responsible for processing the consumer's payment, as shown on the consumer's card statement. In travel, that can be the supplier or the agency.

The supplier is the merchant

When an agency books a cruise or a tour and the cruise line or tour operator charges the customer's card, the supplier is the merchant of record and the agency earns a commission. Airline tickets sold through the Airlines Reporting Corporation (ARC) work the same way: the agency accepts the card on the airline's behalf, and a dispute goes to the airline's payment processor. The agency does not need its own merchant account for that sale.

That does not make the agency risk-free. ARC's guide to payment card acceptance, excerpted from its Industry Agents' Handbook, says that disputes go to the airline's payment processor, that the airline is expected to contact the agent for evidence before the response window closes, and that if the airline cannot reverse the chargeback the agent assumes financial responsibility for the resulting debit memo. The same guide states plainly that the agent is financially responsible for the sale, associated fees and chargebacks.

The agency is the merchant

When the agency charges the card itself, through its own merchant account, the agency is the merchant of record. This is common for packages an agency assembles from several suppliers, for tour operators selling their own departures, and for the agency's own service fees. The agency then answers every dispute, owes the refund when a supplier fails, and holds the customer's money until it pays the suppliers. Many agencies run both models, and an application should say clearly which bookings run through which.

Why a travel booking stays open until the trip

Visa's Merchant Data Standards Manual (April 2026) places travel agencies under MCC 4722, Travel Agencies and Tour Operators: merchants that act as agents for travelers in booking air, land or sea transportation and accommodation, and that arrange and assemble tours, including charter and tour bus operators. The risk is timing: the customer pays today for a trip that may be months away, delivered by someone else.

Card dispute rules follow the trip date, not the payment date. Under Visa's rules (18 April 2026), a Merchandise/Services Not Received dispute, condition 13.1, can be filed within 120 calendar days of the transaction processing date or within 120 calendar days of the last date the cardholder expected to receive the service, never more than 540 days after processing. Mastercard's Chargeback Guide allows a goods-or-services-not-provided chargeback within 120 calendar days of the latest anticipated delivery or performance date the merchant specified, and allows it immediately when the issuer learns the merchant will not provide the service at all, for example because it has gone out of business. Mastercard also lists travel arranged through an online travel agency or tour operator that is no longer in business as a ground for this chargeback in its own right.

Visa has one rule written with travel agencies in mind. When the underlying service provider cancels, the issuer must wait 30 calendar days from that cancellation before filing a 13.1 dispute against a merchant under MCC 4722, twice the standard 15-day wait. That month is the agency's window to refund or rebook before the dispute arrives. It disappears in the case that matters most: Visa's rules say the waiting period does not apply if the merchant is insolvent or bankrupt.

Put together, every booking taken for travel that has not yet happened is a refund the acquiring bank could end up funding if the agency or a supplier fails. Underwriters size that exposure from how far ahead you sell and how much unflown, unsailed travel sits on the books at any one time, which is why a travel account may come with a reserve or delayed funding tied to departure dates rather than to past chargeback history.

State seller-of-travel laws put customer money in trust

Several states regulate sellers of travel, and the strictest say where customer payments must be held. Card settlements are customer payments, so these rules reach into how an agency's merchant account is set up.

California

California's Seller of Travel Law (Business and Professions Code sections 17550 and following) covers anyone who sells or arranges air or sea transportation, or land or water transportation where the total charge to the passenger exceeds $300. Airlines, ocean carriers and some hotels are excluded. A seller must register with the Attorney General's Seller of Travel Program, at $100 per business location, at least 10 days before marketing or selling to people in California, and that includes locations outside California that do business with California customers.

Registration requires financial security, chosen from four options listed in the program's instructions: a trust account, a surety bond, an approved Consumer Protection Deposit Plan, or the credit card exemption. Under section 17550.15, a seller using the trust account must deposit 100 percent of all sums received, expressly including credit card payments, into a trust account at a federally insured institution. Money can leave that account only to pay the carrier or travel provider, to pay ARC, to make refunds, or to take the agency's own compensation once tickets or vouchers have been delivered or the provider has been paid in full. A bond can replace the trust account, but it must be at least equal to the amount that would otherwise be held in trust, and a bond required by another state or an ARC bond does not count.

The credit card exemption is narrower than its name suggests. It applies only when all three conditions are met: the customer pays by credit card, the seller does not deposit, negotiate or factor the charge or receive the money into any account it controls, and the carrier or service provider processes the charge itself. In other words, the exemption covers the supplier-as-merchant model. An agency that runs the card through its own merchant account does not qualify, so its card settlements must go into the trust account unless it carries an adequate bond or an approved deposit plan.

California also sets a refund deadline. Under section 17550.14, money for travel not provided must be returned within 30 days of the scheduled departure, the refund request or the seller's cancellation, or within three days of the day the seller is first unable to provide the travel, whichever is earlier. Sellers whose principal place of business is in California and who deal with California customers must also participate in the Travel Consumer Restitution Corporation fund, which charges its own assessments, paid separately from the registration fee.

Washington

Washington's Sellers of Travel Act (RCW 19.138) requires registration and, under RCW 19.138.140, a trust account at a federally insured institution located in Washington for any sums held more than five business days. Payments made through ARC are excluded. The statute uses the same three-part credit card exemption as California, so it again covers only charges processed by the carrier or provider. A seller can skip the trust account by filing a surety bond of between $10,000 and $50,000, set by rule according to its prior-year Washington business.

Hawaii

Hawaii's travel agency law (HRS chapter 468L) requires registration before selling, and section 468L-5 requires an agency to deposit all consumer payments into a trust account at a federally insured institution located in Hawaii within five business days. An agency paid by credit, charge or debit card is treated as compliant if it submits the charge data to its processor or card issuer within five days of the charge and handles the money it receives under the same trust rules. Commission can be withdrawn up to a maximum of 15 percent.

Florida

Florida's Department of Agriculture and Consumer Services requires sellers of travel to register annually unless exempt, and to post a performance bond of up to $25,000, or $50,000 for sellers of vacation certificates.

Other states have their own rules, and they can reach agencies based elsewhere: California's applies to out-of-state sellers that do business with people in California. An online agency selling nationally should check each state it sells into. In practice, the deposit account you give your processor for settlement matters: if you are merchant of record under one of these trust account laws and have not replaced the trust account with a bond, card settlements generally need to end up in that account, and your processor should know it.

Airfare refunds when the agency is merchant of record

The Department of Transportation's refund rule, adopted in April 2024, makes it an unfair or deceptive practice under 14 CFR 399.80(l) for a ticket agent that is merchant of record to fail to promptly refund airfare, including taxes and ancillary fees, when a flight is cancelled or significantly delayed or changed and the consumer chooses not to travel or accept other compensation. The rule sets the clock and the method:

• A prompt refund is made within 7 business days of the agent receiving the carrier's information for credit card purchases, and within 20 calendar days for cash, check, debit card and other forms of payment.
• Refunds go back to the original form of payment unless the consumer agrees to a cash-equivalent alternative.
• The agent may keep its own service fee only if the service went beyond processing payment for a flight the consumer found, the fee is per passenger, and its amount and non-refundable nature were clearly disclosed at purchase.
• Any travel credit or voucher offered instead must remain valid for at least five years, and the consumer must first be told if they are entitled to a refund.

The rule also makes the airline do its part. Under 14 CFR 260.6, the carrier must tell the agent without delay whether the passenger is eligible, and where the agent owes the refund but does not hold the money, the carrier must promptly transfer the funds to the agent. One narrow carve-out is in place: on July 7, 2026 the Department extended until July 7, 2027 its decision not to enforce the refund requirements for flights that are merely renumbered, where the passenger is rebooked and the flight operates without a significant change or delay, while it reconsiders the definition of a cancelled flight. Outside that carve-out, the requirements above remain in the current Code of Federal Regulations.

Hotel and vacation rental pricing: the FTC Fees Rule

The FTC's Rule on Unfair or Deceptive Fees, 16 CFR part 464, took effect on May 12, 2025 and covers two kinds of purchase: live-event tickets and short-term lodging, defined to include hotels, motels, inns, short-term rentals and vacation rentals. Any business that offers, displays or advertises a price for lodging must show the total price, meaning every mandatory fee, more prominently than other pricing information. Only government charges and optional extras may be left out, and those must be disclosed, with the final amount, before the customer agrees to pay. The FTC's guidance names third-party platforms, resellers and travel agents as covered, so an agency or booking site quoting room prices must follow it.

What underwriters will ask a travel business

Because the exposure is forward-looking, expect the application to go beyond processing statements. Typical questions include:

• Which bookings run through your merchant account and which are processed by suppliers, and roughly how volume splits between the two.
• How far ahead of departure customers pay, whether you take deposits with final payment later, and how much booked-but-not-yet-travelled volume you carry at peak.
• When you pay suppliers, and whether customer money is held in a trust account or protected by a bond.
• Your state seller-of-travel registrations, ARC, IATAN or CLIA numbers if you have them, and any bonds or travel protection you sell.
• Your cancellation and refund terms, where the customer accepts them, and how quickly you refund when a supplier cancels.
• Your price display for lodging and the fees you charge on airfare, since both are now regulated.

Keeping chargebacks down on future-dated sales

Most travel disputes are about cancellations and changes rather than outright fraud, and most of them can be headed off with process:

• Refund or rebook inside the 30-day Visa window after a supplier cancels. A refund that has already posted answers a dispute before it is filed.
• Show cancellation, change and refund terms before payment and keep proof the customer accepted them. ARC's guide makes the same point for airline sales.
• Keep supplier confirmations, e-tickets, vouchers and itineraries with each booking. They are the evidence that services were provided or were available.
• Watch for the agency's own exposure on supplier-processed sales, since ARC debit memos come back to the agent when the airline cannot reverse a chargeback.

Travel is high risk because the money arrives long before the trip. A clear account of who is merchant of record for what, where customer money is held and how refunds are handled is usually what separates an approval on workable terms from a decline. PayKings works with travel agencies, tour operators and booking sites and can help you present that picture to an underwriter.