Are Australian Airlines Overcharging for Interchange Fees?
In 2003 the Reserve Bank of Australia lifted the ban on passing along credit card interchange fees to consumers and the consumer group Choice is now reporting that Qantas and Tiger airlines are making profits from overcharging consumers for these fees. Credit card companies charge an interchange or transaction fee to the vendor on credit card purchases and this fee is usually a percentage of the total amount of the transaction.
Some airlines are charging a set fee on credit card transactions which means the transaction fee for a short domestic flight is the same as the transaction fee for a first class international flight. In addition, even though most people booking multiple seats pay for all of the seats at the same time, the airlines charge the same transaction fee for each seat that is booked.
In the case of Qantas, the credit card booking fee is $7.70 for domestic flights and $25.00 for international flights while Tiger charges a flat convenience fee of $6.00 per booking when consumers pay with a credit card. If a family books four seats on the same flight and pays the full amount on their credit card, the charges on a domestic flight for Qantas are $30.80 and on a flight for Tiger the fee would be $24.00. The actual interchange fees charged are 0.88% for MasterCard and 0.6% by Visa.
The airlines deny any wrong doing and note that the fees are disclosed on their websites and at the time passengers book their flights. They contend they do not make any profit from the fees and that the fees cover costs such as bad debt, security and fraud prevention. The airlines further state that the reason for charging a flat fee is transparency so customers are aware of the amount of the transaction fee.
Choice indicates that on a booking with a cost of $1000 for four seats the transaction charges for Qantas are 180% of the actual interchange fee. Most Australians book flights with a credit card for reasons of convenience and security especially if the tickets are purchased online which means they can’t avoid the interchange fees. If the customer is redeeming frequent flyer points, they may still have to pay the transaction fees.
The cost of the convenience of paying by credit card may be higher than consumers realize especially for those who frequently travel by air. While there is little individuals can do about these charges, everyone should at least be aware of them.