Will Airlines Stop Rorting Us With Excessive Credit Card Charges?

New regulations are supposed to ban airlines and other businesses from charging "excessive" surcharges for credit card payments. But will those new rules actually be enforced, or are we stuck with ever-growing charges just so we can pay for tickets?

Credit card picture from Shutterstock

We wrote about proposals by the Reserve Bank to restrict excessive credit charges back in June last year. There have been some delays in implementing the proposals, but they will become effective from March 18.

The rules don't stop merchants (such as airlines, taxi companies or ticket sellers) from charging for the use of credit cards, but they do allow individual credit card providers (in practice, MasterCard and Visa) to limit those charges to "the reasonable costs of card acceptance". In other words: if it costs Qantas $1 in fees to accept your credit card payments, then the airline shouldn't be charging you $7.70 for the privilege of paying that way.

An analysis by consumer advocate CHOICE suggests the actual costs are much lower while the fees are getting higher. The typical charge to a merchant to process a credit card payment is 0.86 per cent of the value. CHOICE head of campaigns Matt Levey noted in a media release that current charges don't reflect this:

Jetstar charges a flat credit card fee of $17 per passenger for a $70 return flight from Sydney to Melbourne paid using Visa or MasterCard. That is a staggering 24 per cent surcharge, and a 2670 per cent mark up on the average merchant service fee.

Those fees have also risen rapidly in recent years. In 2010, Jetstar charged $3.50 per flight per passenger; the current fee is $8.50. Virgin Australia charged $3.50 per flight per passenger in 2010, but now charges $7.70 per booking (much costlier for one-way flights). Tiger's charges have risen from $7.20 per sector per passenger to $8.50. (Qantas' fees for domestic flights have stayed the same, but were much higher to begin with at $7.70 per sector per passenger.)

What sucks about the new regulations is that the enforcement mechanism resides with the credit card providers, not a third party such as the ACCC. If card providers don't force airlines (or other serial offenders such as Cabcharge) to make their fees reasonable, we'll be stuck with them (possibly under dubious labels such as 'booking fee').

CHOICE is running a petition calling on airlines and Cabcharge to eliminate these fees. Given the parlous state of the airline industry, I'm not entirely hopeful this will work, but it can't hurt to try.


Comments

    But let's face it - the real reason they charge hefty fees for Visa, Mastercard, Amex and Diners Club is to try and force regular fliers into signing up for the airline's own credit card. Yes, they do offer the options of POLI or direct debit, but using these makes the booking process longer and more complicated for those who aren't internet-savvy.

      I use a NAB Velocity card and I still get whopped using it to buy Virgin Flights!!

    Never mind whether there is any way to enforce the current rort, what's stopping them from continuing to raise the charges?

    They don't do it so much to gain extra revenue from the fees, they do it so they can advertise lower fares than their competitors, but then charge full cost. Having the lowest advertised fare results in lots more people booking with that airline.
    I reported this issue to the ACCC 5 years ago which resulted in their previous investigation and crackdown on airline pricing.
    The fuel surcharge was even worse that the credit card fees because it allowed airlines to move an arbitrary amount of their ticket cost into a compulsory fee, substantially reducing the advertised prices for flights. Fuel is so blatantly part of the cost of a flight that it motivated me to complain to the ACCC.

    Last edited 07/03/13 10:30 am

    In defence of the airlines, there are other infrastructure costs aside from the surcharge. That being said, it's still a rort.

    A revolution (or maybe revolt) is required in the airline industry similar to what the banking industry went through a few years ago, which was also levying fees which in no way reflected the cost to the bank.

    Another culprit is surely the ticketing industry, which levies ticket delivery fees in cases where there is negligible operating cost to the provider. e.g. electronic delivery.

    The way I see it, these rates may go down, but ticket prices will go up ever so slightly until you're paying a credit card fee without even realising it.

    Qantas don't charge a credit card payment fee.

    Jetstar does, but you can avoid it by paying with a direct bank account credit.

    Not exactly rocket science.

      What are you talking about? Qantas charge up to $30 per person for credit card fees... http://www.qantas.com.au/travel/airlines/schedule-of-fees/au/en

        The post notes quite clearly that the $7.70 is the domestic Qantas fee. The $30 is international. Also stupidly high, but didn't mention here as it doesn't compare directly to the other fees (also for domestic flights).

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