Say goodbye to sneaky card charges

We may be seeing the last of unfair booking fees.

With a three-week old baby at home, chances are it’s going to be a wee while before I next head off on holiday (no matter how much my wife and I could use one at the moment).

However, for those of you lucky enough to be considering a jaunt abroad in the near future, there is some potential good news – a consumer charity has declared war on the hated extra charges you face when booking with budget airlines.

Time for a super-complaint!

Consumer champion Which? has launched a super-complaint regarding credit card surcharges to the Office of Fair Trading. As a registered charity it has the power to call on the OFT to investigate whether such charges are excessive, as they cost far more than what the retailer has to spend processing the transaction.

The action has immediately garnered support from Consumer Focus and the UK Cards Association.

So what happens next with the super-complaint? And are there ways around such card charges?

Card surcharges

First, however, it’s worth reviewing exactly what these charges are that have Which? so upset, and where you are most likely to have to pay them.

Card surcharges are extra charges you are lumped with when paying for things by debit or credit card. They tend to take the form of either a percentage of your total spend, or a flat fee. What’s more, they are known by all sorts of different names – booking fees, handling fees, transaction fees and service charges, among others.

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Anyone who has ever flown with a low-cost airline will know that you can’t avoid them when paying for your trip, but according to Which? there are plenty of other outfits, from estate agents to cinemas, which are also guilty of levying excessive charges. My own football club, West Ham, have long stuck an extra couple of quid on top of our already extortionate ticket prices in booking fees. Indeed, even the Driver and Vehicle Licensing Agency (DVLA) has started doing so!

What’s so bad about them?

Opponents of these surcharges – and there are plenty of them – argue that the fees charged are excessive. Which? reckons that the actual cost to retailers for processing a payment by debit card is a paltry 20p. And for credit card payments, it comes to no more than 2% of the total transaction.

However, the actual fees we all fork out are far in excess of that. Indeed, if you’re buying a number of tickets for the same event, and getting whacked with a separate fee for each ticket, the costs can really add up.

What’s more, the fees are often only made apparent at the final point of purchase, which makes it difficult to accurately compare prices for things like airfares.

What next?

Now that Which? has tabled its super-complaint, the OFT has 90 days in which to respond. It may be that at that point, the OFT will make a pronouncement on whether such fees are indeed excessive or not. However, given the potential complexity of the issue, I’d say it’s far more likely that the OFT will instead announce a market study at that point.

Can we avoid them?

It's difficult to avoid the charges completely. But there are ways to minimise the amount you have to hand over. For example, booking fees are often smaller if you use a debit card, so paying with a debit rather than credit card can save you a few quid.

However, with larger purchases this is a dangerous game to play, as you will be missing out on the extra protection afforded you by Section 75 of the Consumer Credit Act. So while you may save yourself a few quid in the beginning, should the airline go bust, the fact that you used your debit card rather than credit card may end up costing you far more in the long run.

One way to get around this is to pay £1 of the transaction on your credit card, and pay the rest by debit card. If you can do this, then you will be protected for the full cost of the transaction by Section 75 (as long as the price of the item is £100 or more).

However, many websites won't allow you to split the transaction across two different cards in this way. Luckily, there is another way to sidestep some budget airline charges altogether – prepaid cards.

Prepaid cards

Some airlines do not charge a booking fee if you are pay with a certain type of card. For example, if you wish to fly with Ryanair, there are no extra charges if you pay with a prepaid Mastercard.

The name tells you all you really need to know about prepaid cards – you put the money on the card in the first place, transferring cash over from your bank account. You can then use the prepaid card to pay for your tickets, or whatever.

There are a number of different providers who offer prepaid Mastercards, including FairFX, Neteller and Caxton FX (a card I have myself, and can recommend). However, it’s worth remembering that while you will miss out on the charges from Ryanair, you will still be hit with charges from the card provider! So it’s far from a perfect solution.

Other airlines do not levy a charge if you pay with Visa electron. However, given that in order to get hold of one you’d likely have to change your bank account, and then pay with your debit card (which as I’ve already explained is a risky move) it seems too much like hard work to me.

For now at least, booking fees are just something we will all have to grin and bear. Let’s hope that Which’s action at least gets them down to a reasonable level.

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