New airline surcharges for credit, debit card payments start today

written by australianaviation.com.au | September 1, 2016
Airlines have introduced new arrangements for credit and debit card payments. (Petr Kratochvil/Wikimedia Commons)
Airlines have introduced new arrangements for credit and debit card payments. (Petr Kratochvil/Wikimedia Commons)

Australia’s major carriers have implemented new fees for payments made with credit and debit cards in line with changes to the way the Reserve Bank of Australia (RBA) regulates these charges.

Jetstar, Tigerair Australia, Qantas and Virgin Australia have all switched from a fixed fee to one that is calculated as a percentage of the total cost of a ticket. The changes came into effect on Thursday.

While the airlines say passengers are likely to pay less as a result of the changes, those travelling internationally may be charged a higher credit or debit card surcharge under the new system.

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The changes were prompted by the Reserve Bank of Australia (RBA) changing the way it regulated credit card surcharges.

The RBA said in May merchants would retain the right to add a surcharge “for more expensive payment methods” under its new surcharging standard.

“However, consistent with the Government’s recent amendments to the Competition and Consumer Act 2010, the new standard will ensure that consumers using payment cards from designated systems (eftpos, the debit and credit systems of MasterCard and Visa, and the American Express companion card system) cannot be surcharged in excess of a merchant’s cost of acceptance for that card system,” the RBA said.

“With the cost of acceptance defined in percentage terms, merchants will not be able to impose high fixed-amount surcharges on low-value transactions, as has been typical for airlines.”

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The RBA said the Australian Competition and Consumer Commission (ACCC) would have enforcement powers under the new framework, which take effect on Thursday for large merchants, defined as having two of the following attributes: gross revenue of $25 million or more, gross assets worth $12.5 million or more, or with 50 or more employees. All other merchants have until September 1 2017 to comply.

ACCC chairman Rod Sims said the move to percentage-based surcharges was an expected result of the RBA’s changes.

“The new law has caused many large businesses to review their pricing practices,” ACCC chairman Rod Sims said in a statement.

“We expect to see a move from flat-fee surcharges for purchasing items like flights, towards percentage-based or capped surcharges.

“The new law limits the amount a large business can charge customers for use of payment methods such as most credit and debit cards. Businesses can only pass on the permitted costs of the payment method such as bank fees and terminal costs.”

The ACCC noted figures from the RBA showed the cost to merchants of accepting payments by debit cards was about 0.5 per cent, while it was between one and 1.5 per cent for credit cards and in the region of two to three per cent for American Express cards.

“Some merchants’ costs might be higher than these indicative figures,” the ACCC said.

The ACCC said consumers who believed they had been slugged with an excessive surcharge could contact the ACCC via its website.

Qantas cash card. (Qantas)
Qantas cash card. (Qantas)

Qantas outlined its new fees in early July. Consumers will be charged 0.6 per cent of the fare for paying with a debit card or prepaid card and 1.3 per cent of the fare for credit and charge cards irrespective of whether the flights is for domestic, trans-Tasman or international travel.

The card payment fee would be a capped at $11 for domestic and trans-Tasman flights, and $70 for other international flights.

“The majority of Qantas customers will pay the same or less in card payment fees than they do today, while some customers may pay more. Card payment fee caps will apply per ticket per card so customers will know the maximum amount,” Qantas said in a note to travel agents in July.

“As always we’ll continue our focus on providing great value for money for you and all of our customers through competitive pricing and investment in new products, services and technology.”

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Virgin Australia has adopted a similar system, with credit card payments from September 1 attracting an 1.3 per cent surcharge, while debit card payments would have an 0.6 per cent surcharge per booking. As with Qantas, these surcharges were capped at $11 for domestic flights and $70 for international flights. And those purchasing tickets via PayPal would pay $5 per passenger, per booking, Virgin said on its website.

Percentage-based fees have also been introduced at Tigerair, with the Virgin-owned low-cost carrier having a four-tiered charging structure depending on the card used.

Those paying with a Mastercard debit card would be subject to an 0.86 per cent payment, while Visa Debit cards attracted an 0.88 per cent surcharge, Tigerair said in a statement. Previously, payments with Australian-issued Mastercard debit cards were not charged the “booking and service fee” of $8.50 for domestic and $12.50 for international flights.

MasterCard debit. (MasterCard)
Tigerair Australia is ending the fee-free option for those paying with Australian-issued MasterCard debit cards. (MasterCard)

Tigerair bookings made with Mastercard credit cards had a 1.25 per cent surcharge, while it was 1.33 per cent for Visa credit cards. The airline was also introducing a fee-free payment option through the POLi. The airline does not accept American Express or Diners cards.

There were also multiple payment levels for Jetstar’s flights from and within Australia depending on the payment type – credit cards attracted a 1.06 per cent surcharge, debit cards were at 0.48 per cent and those using PayPal would be subjected to an 0.75 per cent fee.

Jetstar Mastercard. (Jetstar)
Those booking Jetstar flights with one of the airline’s MasterCards will avoid paying a surcharge. (Jetstar)

Those paying by POLi, as well as with Jetstar-branded Mastercards, would not pay any surcharge, Jetstar said.

“The majority of Jetstar customers will pay less in fees than they currently do, and there’ll continue to be fee-free options for customers who prefer not to pay with a credit card,” Jetstar said in an emailed statement.

“These fees cover the costs associated with accepting these payments.”

Qantas and Virgin told a parliamentary inquiry in November 2015 their surcharges and booking fees recovered less than the reasonable cost of processing card payments.

Summary of new payment surcharges at Australian carriers
Virgin Australia

1.3 per cent for credit cards
0.6 per cent for debit cards
$5 per passenger per booking for PayPal payments
Capped at $11 for domestic flights, and $70 for international flights
Previously:
$7.70 per person per domestic booking
$10 per person per short-haul international booking
$30 per person per long-haul international booking

Jetstar

1.06 per cent for credit cards
0.48 per cent for debit cards
0.75 per cent for PayPal payments
No fee for Jetstar-issued MasterCard credit cards
Previously:
$8.50 per passenger per domestic flight
$8.50-$12.50 per passenger per international flight
No fee for Jetstar-issued MasterCard credit cards

Tigerair Australia

0.86 per cent for MasterCard debit cards
0.88 per cent for Visa debit cards
1.25 per cent for MasterCard credit cards
1.33 per cent for Visa credit cards
Previously:
$8.50 per person per domestic flight
$12.50 per person per international flight
No fee for Australian-issued MasterCard debit cards

Qantas

0.6 per cent for debit card or prepaid card payments
1.3 per cent for credit and charge cards
Capped at $11 for domestic and trans-Tasman flights, and $70 for other international flights
Previously:
$7 per person per domestic or trans-Tasman booking
$30 per person per international booking

All airlines also offer at least one fee-free payment option such as POLI or direct debit

(Source: airlines’ websites)

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5 Comments

  • john

    says:

    that’s fine, but doesn’t take in accounts chargebacks by the dodgy banks. For those who don’t know about this …

    if an airline goes belly up & a travel agent has put a credit card thru on their own merchant number, the dodgy banks wipe their hands & charge back to the agent 100% of charge.

    Why would an agent do this is these economic times ? For many special airfares, the airlines won’t accept credit cards at all.

  • John Gibson

    says:

    Having read & interpreted what realistic savings; (re my overall summary of “winners & losers” / Domestic v International bookings / etc, – that relief from credit card booking fees; coming out of this new ACCC requirement; i see very little overall benefit for the Average Australian Airline customer paying with a credit card !

    I think the ACCC could have instead, looked at the internet booking site of one Australian airline’s budget carrier in particular ! There you can enter the their web booking site expecting to take up an advertised fare offer of lets say $125, and, through not comprehending fully the – “manipulative cost increase implications options”, of a series of booking page steps, arrive out the other side having an invoice to meet of $ 195 !

  • john

    says:

    yes but John Gibson, you can still pay $125 if you want. The whole idea, that baggage should be included in fare, is so 20th century. Most people carry too much crap anyway & it costs a lot in fuel to carry it.

  • ian

    says:

    & for that extra luggage they don’t have to carry, they can carry more freight

  • Adrian P

    says:

    Fuel surcharge should be looked at.

    Introduced during a volatile fuel market, now has become a permanent feature.

    With falling fuel prices the surcharge should now be a negative figure giving the customer a discount on advertised fare.

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