End to sky-high airline credit card fees

Kate Schneider
June 13, 2012
news.com.au

THE days of travellers being slugged excessive fees just for using a credit or debit card to book a flight may soon be over.

The Reserve Bank of Australia has decided to limit card surcharges to the reasonable cost of the merchant accepting the card.

The varied standards, which will come into force on 1 January 2013, will essentially fix a $700 million-a-year credit card rip-off of its own creation by capping the surcharges.

The move comes after Qantas hit out at claims it rakes in approximately $100 every year from card charges for flight bookings.

Most consumers pay an average surcharge of nearly 2 per cent to use their cards for purchases, while merchants pay 1 per cent, however Qantas applies a flat fee that can add 8 per cent to a flight to Tamworth or Fiji.

The RBA said the reasonable cost of acceptance includes the merchant service fee, but it may also include a range of other costs. Companies will also be allowed to apply different surcharges for different card types.

The bank was concerned about “excessive” surcharging and “blended” surcharging – imposing the same fee for Visa, Mastercard, American Express and Diners even though the cost of accepting the latter two is more than double the others.

It hopes the variation will improve price signals by enabling a card scheme to address cases where merchants are clearly surcharging at a higher level than is justified for acceptance of its card products.

While it will be “discouraged”, the new Standards do not explicitly prohibit the practice of blended surcharging across debit and credit cards within a card scheme.