Will my credit card issuer refund me if my airline goes bankrupt?
Update: Some offers mentioned below are no longer available. View the current offers here.
Editor's note: This post has been updated to reflect changes to card benefits. It was originally published on Jan. 31, 2019.
"Reader Questions" are answered twice a week by TPG Senior Points & Miles Contributor Ethan Steinberg.
While we might not like to think about the laws of gravity while flying at 38,000 feet, what goes up must come down. Over the last few years we've seen that logic applied to a number of low-cost and leisure carriers. Primera Air collapsed with little warning, followed shortly thereafter by WOW Air and Thomas Cook. TPG reader Robert wants to know what type of protection he'll have if he books a ticket and the airline ends up filing for bankruptcy ...
[pullquote source="TPG READER ROBERT"]I have five round-trip tickets from New York to Stockholm booked on Norwegian for July. If the airline goes bankrupt by then will I be reimbursed or am I out of luck?[/pullquote]
Norwegian Air has been in a precarious financial position for a while now, and I'm sure Robert isn't the only one concerned about this possibility. However, right off the bat, it's important to note that bankruptcy doesn't necessarily mean that an airline is going to stop flying. We did see that with airberlin, and Alitalia has been bankrupt for some time yet continues to limp along.
That said, there are a few possible ways Robert might get his money back if Norwegian ceases operations. Let's start with the most obvious one — the airline issuing a direct refund. It's impossible to say for certain whether this would happen, as this is highly dependent on Norwegian's debt structure/obligations (i.e. which creditors are entitled to get paid first) and cash on hand at the time of bankruptcy. Obviously this would be the simplest solution, but even if it doesn't happen, Robert isn't totally out of luck.
If you purchase a ticket on your credit card and don't receive the service for which you paid, you can initiate a chargeback or dispute with the issuer. I spoke to representatives from both Chase and American Express on the phone, and while they couldn't confirm the outcome of any such dispute, they said that paying for a service and not receiving it would give you a very strong case and good odds of getting your money back.
Robert might also have access to travel insurance through his credit card, especially if he booked using a credit card with trip interruption and cancellation insurance. Unfortunately, Chase recently updated the language in its travel insurance policy with no announcement. While "financial insolvency of a travel supplier" used to be listed under the "what's covered" section on cards like the Chase Sapphire Reserve, now, you'll find it under the "what's not covered section."
Related: Battle of the premium travel rewards cards: Which is the best?
It's possible that Chase made this change due to a spike in bankruptcy related insurance claims, but whatever the reason it's important to understand that Chase cardholders can't fall back on their travel insurance plans anymore in the event of an airline bankruptcy.
Last but not least, Robert might be entitled to compensation of up to 600 Euros (~$680) per person under EU 261, the European Union's generous passenger bill of rights, given that his itinerary includes flights operated by a carrier based in the EU, and those flights both arrive into and depart from an EU member country. However, there are many gray areas here. Was he able to be reaccommodated with another airline? Did Norwegian prove that the cancellation was due to "extraordinary circumstances" and thus not subject to compensation? Assuming it's determined that he is due compensation, it once again comes down to available cash, as holders of valid EU 261 claims simply become unsecured creditors, hoping to get paid.
Related: Here's how my $200 travel insurance plan gave me almost $1,300 to spend in Italy
Bottom line
While an airline bankruptcy is one of the fastest ways to ruin a vacation, Robert should rest easy knowing that he has a good chance of recouping the cost of his tickets in the event that happens. If he's still worried, he should consider purchasing supplementary travel insurance through a company like Allianz, but he would need to confirm that Norwegian going bankrupt and ceasing operations would be a covered event under the terms of the policy he buys.
Thanks for the question, Robert, and if you’re a TPG reader who’d like us to answer a question of your own, tweet us at @thepointsguy, message us on Facebook or email us at info@thepointsguy.com.
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- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
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- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
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Rewards Rate
| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 3X | Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com. |
| 2X | Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com. |
| 1X | Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases. |
Intro Offer
You may be eligible for as high as 100,000 Membership Rewards® Points after spending $6,000 in eligible purchases on your new Card in your first 6 months of Membership. Welcome offers vary and you may not be eligible for an offer.As High As 100,000 points. Find Out Your Offer.Annual Fee
$325Recommended Credit
Credit ranges are a variation of FICO® Score 8, one of many types of credit scores lenders may use when considering your credit card application.Excellent to Good
Why We Chose It
There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
- 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.