Are e-checks a safe way to pay for travel?

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By Christopher Elliott

As she paged through Viking River Cruises’ glossy brochure one recent afternoon, Diane Moskal noticed a new way to save money: If she booked the Waterways of the Tsars itinerary sailing from Moscow to St. Petersburg with something called an e-check, the cruise line promised to knock $100 off the fare.

An e-check is an electronic debit to your checking account, and Viking bills it as a quick, convenient way to pay for your vacation that is “as easy as providing your credit card number.”

But like any smart traveler, Moskal wasn’t content with that explanation. “I see that the cruise lines advocate consumer savings if you pay by e-check,” she says. But she also found several complaints online, which made her hesitate. She wondered: Are e-checks safe?

Differences between e-checks and credit card payments

As airlines, hotels and cruise lines offer new ways to pay for their products, Moskal’s question resonates across the entire travel industry. On several airlines, including American, Southwest and United, you can book a ticket through PayPal. Virgin Galactic made a splash late last year when it announced that it would accept Bitcoin for its spaceflights. One hostel in San Francisco, the Pacific Tradewinds, famously offers a 30 percent discount to guests who pay with the digital currency.

While Viking River’s e-check option isn’t new — it’s been available since 2008 — the concerns raised by Moskal and others are. It turns out that there are several important differences between paying by e-check and paying by credit card. And given the popularity of new electronic payment choices, it’s a good time to understand how they work.

Americans made 22.1 billion electronic payments using options such as e-checks in 2012, the most recent year for which numbers are available, according to a recent Federal Reserve study. The number of transactions grew at an annual rate of 5.1 percent from 2009 to 2012, the Fed reports. By comparison, consumers conducted 26.2 billion credit card transactions in 2012, and those numbers grew at a somewhat faster 7.6 percent annual rate.

The benefits to companies are obvious: They avoid paying any fees associated with credit cards and they receive the customer’s money right away, deposited directly into their merchant bank. But consumers have an advantage, too, at least according to companies like Viking.

The rise of alternative electronic payment options in travel

“Guests who pay via e-check receive a discount of two percent, which reflects a savings that Viking passes on to the guest by not having to pay a fee to a credit card company,” says Viking spokesman Ian Jeffries. He says that the company also recommends payment via e-check as an alternative to a credit card so that you can avoid any interest rates or fees that some credit card companies may charge.

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Viking is hardly alone. One recent study found that a quarter of airlines worldwide offer some form of alternative electronic payment option. Companies are increasingly adopting these payment choices to avoid the high merchant fees charged by credit cards, and they are expected to become more common in the near future.

Oliver McGee, a former U.S. deputy assistant secretary of transportation for technology policy and a professor at Howard University, explains that conventionally, banks process the discounted pay-by-e-check transactions by using the traveler’s bank routing numbers and checking or savings account numbers.

E-checks come in two basic flavors: Check21 electronic payment processing, which is more flexible but also more expensive, and the more restricted ACH wire deposit payments, commonly used for handling direct deposits for employees and paying bills.

Convenience and limitations

As a practical matter, setting up an e-check involves giving the travel company basic bank information, typically gained through the bank’s routing numbers, as well as your account number, and authorizing the transaction.

But you also sacrifice something when you’re paying with an e-check. As with paper checks, once the company deposits the money into its account, your ability to reverse the charges is limited. Either the ACH or Check21 terms and conditions, as well as the electronic fraud protection conditions of your financial institution, govern your right to dispute a travel purchase made with an e-check.

By comparison, the Fair Credit Billing Act protects a credit card purchase under federal law, allowing you to dispute charges for products you didn’t accept or that weren’t delivered as agreed, and it can quickly fix a billing error.

Payment disputes

“You have more leeway to dispute a purchase made with a credit card,” says David Bakke, who edits the personal finance Web site Money Crashers. (Would surcharges and fees in the travel industry disappear if travelers stopped paying them?)

If an e-check booking goes wrong — say, for example, that your cruise line files for bankruptcy protection and you want a refund — you may lose your money. Bakke says that you can reverse e-checks in only three cases: if you didn’t authorize the purchase, if the e-check was processed on a date earlier than authorized, or if the amount of the processed transaction is different from what you authorized. Otherwise, the money is as good as gone. (Here’s how to win a credit card dispute.)

While complaints about e-checks are rare, grievances with companies over wired money appear to be increasingly common. I receive requests almost every week from someone asking me to help them retrieve money that they had wired to a company or an individual. These transactions are difficult, if not impossible, to undo. Generally, if you’re dealing with a small local company or an individual, you can kiss the cash goodbye.

After I explained the differences in payment methods to Moskal, she consulted her travel agent, who booked her on the Viking riverboat cruise to Russia this fall. “She never raised the question of paying by anything other than credit card,” says Moskal.

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Christopher Elliott

Christopher Elliott is the founder of Elliott Advocacy, a 501(c)(3) nonprofit organization that empowers consumers to solve their problems and helps those who can't. He's the author of numerous books on consumer advocacy and writes three nationally syndicated columns. He also publishes the Elliott Report, a news site for consumers, and Elliott Confidential, a critically acclaimed newsletter about customer service. If you have a consumer problem you can't solve, contact him directly through his advocacy website. You can also follow him on X, Facebook, and LinkedIn, or sign up for his daily newsletter.

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