How airlines make you pay ... for paying

Airlines in Australia and the UK hit passengers with a surcharge to pay with credit or debit cards.
Airlines in Australia and the UK hit passengers with a surcharge to pay with credit or debit cards. Photo: Reuters

If there is one good thing that will happen in 2012, I believe it will be the first legal blueprint for a clampdown on out-of-control price-gouging by airlines and some other retail sellers on credit and debit card sales.

I don’t think it will originate in Australia, but in the United Kingdom where the Office of Fair Trading is investigating the use of surcharging on cards to buy goods in general and travel in particular.

The OFT is being pushed by the British Consumers Association through its consumer service Which? (similar to Choice run by the Australian Consumers Association) to abolish credit card surcharges altogether.

But the OFT has already cracked down on tricky practices that allow airlines and other sellers to hide credit and debit card fees that have little to do with the cost of providing such financial services.

At the very least, the OFT wants card fees included in the headline price of fares, reflecting the fact that almost 100 per cent of consumers pay for them using their own credit or debit cards and not the airlines’ nominated cards to avoid fees, which almost no-one uses.

This still does not happen in Australia or the UK, where the current rules allow airlines to hide fees in the booking process: you will often not discover the level of fees until several online pages into the booking process.

In the UK, the worst is Ryanair, which charges £6 ($A9) per sector or £12 ($18) per return flight, which is not far in front of Tiger Airways in Australia, which is charging $7.50 per sector or $15 return.

These fees have little relationship with the fees merchants pay for the use of credit cards: generally 1-2% of the transaction value, even less for big traders like Qantas or Jetstar, and as little as 20-30 cents for debit cards. On a $150 return fare, Tiger is asking consumers to pay 10 per cent in debit or credit card fees.

“You can't buy online with cash and people are frustrated about being asked to pay for paying," the OFT's goods and consumer group senior director, Cavendish Elithorn, told The Guardian.

“We believe there is a strong case for a change in the law so that the cost of using a debit card – the almost universal payment method for today's online consumers – is always included within the headline price.”

There is still no sign of a result from the OFT investigation but there’s no doubt it will carry weight with its Australian counterpart, the Australian Competition and Consumer Commission, which is wrestling with the same dilemmas and has signalled a stronger line in policing some travel issues, including airports, under new chairman Rod Sims.

Should credit card surcharges be included in headline air fares? Do you think the ACCC does a good job in policing travel issues?

Comments