Credit cards and Airlines...

Airlines have been encouraging customers to pay for tickets using various means beyond credit cards. They are doing this partly to reduce their high credit card processing costs.

This move happens to come as Americans are more often using debit cards and other direct-withdrawal payment methods.

But don’t use these other methods for airplane tickets. Under the federal Fair Credit Billing Act, a credit card company is required to return your money for a service not supplied, like an airplane trip. Debit payment agencies are not.

In recent weeks, some travelers on airlines like Skybus, ATA, Aloha and others have had to scramble for refunds when those airlines abruptly stopped flying. In general, it is a bad idea to pay for an airline ticket with anything but a credit card, Mr. Brancatelli, the publisher of the subscription business travel site Joesentme.com said, because resolving disputes is easier with a credit card company in your corner.

But worse, he said, “If your airline goes belly up and you paid with a debit card, you go to the back of the bankruptcy line with all the other unsecured creditors.”

Related airlines/credit card news. Frontier Airlines on Friday, April 11th, became the latest budget carrier to file for bankruptcy protection, but the airline promised to continue normal operations.

Frontier, based in Denver, said it had filed for protection after its main credit card processor tried to hold back substantial proceeds from its ticket sales. But the airline said it would continue to operate its full schedule of flights and honor ticket reservations.
Sean Menke, Frontier president and chief executive, in a statement said, “We felt that Frontier would be able to withstand the challenges confronting the U.S. airline industry, which include unprecedented and significant increases in the cost of jet fuel and the impact of the credit crisis in the financial markets, without seeking bankruptcy protection.”

“Unfortunately, our principal credit card processor, very recently and unexpectedly informed us that, beginning on April 11, it intended to start withholding significant proceeds received from the sale of Frontier tickets,” he said. “This change in established practices would have represented a material change to our cash forecasts and business plan. Unchecked, it would have put severe restraints on Frontier’s liquidity and would have made it impossible for us to continue normal operations.”

In its court petition, Frontier said that the credit card processor, the First Data Corporation, had notified the airline that it was increasing the amount of collateral it required to $130 million from $54.5 million and that it would retain 50 percent of the airline’s bank card sales.