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.

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