Credit Card Protection

Hey there, time traveller!
This article was published 01/09/2008 (6506 days ago), so information in it may no longer be current.

It seems that there is a new security blanket coddling travellers, and this is that credit card companies will automatically reimburse ticket-holders on bankrupt airlines. I am not altogether sure where this idea comes from and to whose benefit its promulgation lies.I am, however, fairly sure that the truth is extremely complex, and that an automatic refund is out of the question.Some credit cards carry a variety of insurance benefits, and it may be that coverage is included in this package; it may be that credit card companies like the idea of such a masterful position and in the absence of a huge collapse have paid off customers, writing these ex-gratia payments off to goodwill.There is a thought that reimbursement is due to the “non-provision” of service for which an intermediary company (viz: the credit card) has taken payment. Perhaps; but perhaps not.Imagine, if you will, a hypothetical bankruptcy of United Airlines or British Airways. Unlike Zoom or Jetsgo, each of these august carriers will have hundreds of millions of dollars of such prepaid tickets. It is unthinkable that the credit card companies will have the money to back-stop a failure of that proportion.Each merchant for a credit card company is obliged to post a bond, if required, that reflects the potential of default. It is from these monies that reimbursement flows. While a small tour operator (or airline) may be required to post a bond of say $1 million, it is inconceivable that giant carriers would be able to post such a bond to cover all of their unflown customers.There are insurance companies who offer “default” coverage; this protection, if it still applies to airlines, has significant limits, usually to a maximum of $2 or 3 million per occurrence. Not much on a per person basis if 15,000 passengers are caught.The whole question of consumer protection will again raise its head, and it is an area that should be investigated thoroughly. It is not a solution to simply establish a fund that will allow weak companies to sail close to the wind secure in the knowledge that strong companies will effectively bail them out.In the end, protection is the responsibility of the purchaser; they should, however, have some assurance that multi-million dollar industries like travel have some vestige of financial oversight.The travel industry does not. It is time that it did.