Virtual Cards (VCCs) carry a higher fee than any of our other payment methods. This article explains why they're different, and why they cost so much.
💡 If you have been asked by your OTA to switch to VCCs, please get in touch with Tab so that we can discuss your options and help you make the best choice for your business.
Virtual Cards are a specific way for OTAs (like Booking.com or Expedia) to pay you if they charge your guests themselves, rather than sending you a bank transfer. They are not the same as receiving a guest’s card details which you then charge yourself (at our regular, lower fee). You can check the difference here.
We're aware that some OTAs are increasingly pushing businesses towards receiving VCCs, because it is a more profitable approach for them. As such, we really recommend that wherever you have a choice you do not choose to use VCCs.
We offer alternative ways to charge your customers directly, which are significantly cheaper for you (and often for your guest too). If you'd like to talk to one of our team about the best options for your business, please get in touch.
Why are VCCs so expensive?
VCCs are different from normal customer cards, so not all payment processors can process them. Many specifically choose not to, as they're more difficult and more expensive to process than normal customer cards.
At Tab, you can process these cards. However, we have to charge more for them (7.9% +1 USD) because they're much more expensive for us to process.
VCCs are more expensive to process because the OTAs receive a commission fee on VCC payments. This fee is effectively passed on to your business via a higher fee for charging that type of card. So effectively, you are paying twice here — once to cover the OTA’s cost, and again to cover the cost of charging an expensive card type, in the form of a VCC.
If your VCCs are issued in USD, EUR or GBP (and VCCs are less than 50% of your total volume) we may be able to reduce your fees.
Are VCCs more secure than charging the customer?
This is a bit of a myth. VCCs are more secure in the sense that they take away the hassle of making sure the customer's card details are correct. They also avoid a customer’s card details being shared with the tourism business providing the service.
However, the biggest risk for most tourism businesses is that a customer disputes a payment and issues a chargeback. When a customer pays directly (e.g. using a payment link), chargeback rates are very low, and you can submit evidence to dispute them if they happen.
Chargeback rates on VCCs are about three times higher than when a customer pays themselves, and are increasing. If a customer issues a chargeback on a payment that used a VCC, the OTA doesn't dispute it and issues a chargeback directly on the VCC. Because it's the OTA issuing the chargeback, you’re not able to challenge them in the way you would with a normal customer dispute.
By using VCCs, OTAs effectively pass all the risk on to the payment processor. This means that they can take less care to check the quality of businesses that they process payments for, but that responsibility - and cost - gets passed on to us, and ultimately makes it more expensive for you.
This makes VCCs much less secure (and more expensive) than customer card payments.
Are VCCs cheaper for my customer?
Usually not. It depends where your customer is from and how they pay, but paying an OTA often means a traveller incurs an international transaction fee and possibly an FX fee on top (though this is often not transparently shown). When you use Tab to charge your customers directly, we charge your customers in their local currency to avoid this, and charge them a clear, flat fee so there are no nasty surprises. You can read more about this here.
What are my alternatives?
Tab has alternative approaches to charging guests directly, at a much lower cost, rather than receiving VCCs from OTAs. You can read more about them here.