Such charges are rarely advertised, making it difficult to compare the true cost of goods and services. Some are flat charges applied on each transaction, others are a percentage fee.
A report by the consumer organisation Which? found that not only were these charges becoming more common, but they have risen in the past two years. According to Which?, 80pc of its members disagreed with the practice of levying such surcharges, with only 1pc thinking they were a fair reflection of costs incurred by the retailer.
Even the banking industry agrees that the charges incurred often bear little resemblance to the cost of processing the payments. All banks charge retailers a “merchant fee” for processing payments by debit and credit cards. Most are reluctant to divulge the fee size. Large supermarkets, for example, will be able to negotiate smaller merchant fees due to the number of transactions processed. Plus, credit card payments cost more to process than debit card payments, due to the costs associated with borrowing. There may also be extra security costs borne by the retailer in processing online card transactions.
The UK Payments Administration (UKPA) said the typical charge to process a credit card payment would be between 1pc and 2.5pc. For debit cards the actual cost is likely to be closer to 10p. It said that there seemed little justification for companies charging a credit card fee “per item” bought, rather than per transaction. Ryanair and bmibaby charge card fees per passenger per flight, even if all these seats are made in one credit card booking. Likewise, most ticket agencies levy a card charge per ticket.
A spokesman for the UKPA said: “The credit card costs are per transaction. If you are booking six tickets at once, or one ticket in one credit card booking, the processing costs would be the same. It’s hard to see how companies can charge per item.”
These surcharges are common in the travel industry. Train companies, ferries, airlines, tour operators and travel agents are all likely to levy extra fees if booking with a credit or debit card.
Bob Atkinson of travelsupermarket.com said: “Many travel providers are not only passing the bank charges to customers, they are actually increasing them to generate extra revenue. The fact that some holiday companies also charge for debit card payments is a worrying development.”
Given the state of many travel firms’ finances this is probably one area where you should consider paying on credit card where possible, because of the protection given under Section 75 of the Consumer Credit Act.
This means that should the firm go bankrupt, you will be able to claim a refund from your credit card company. Those paying on a Visa debit card get similar protection.
Action points
Although it can be a laborious task, take all fees into account when comparing costs. Don’t assume the cheapest airline seat advertised, or the lowest ticket price, means this will be the cheapest deal overall.
Factor in all additional costs and see how a deal compares. Not all companies add these surcharges: Which? found a handful of travel companies that followed a “what you see is what you get” pricing policy. These included SeaFrance and Trailfinders.
Once you have found the cheapest deal, look at whether you can reduce costs more with a different payment method. By using a Visa debit card, for example, you may pay a lower debit card fee, but still get the consumer protection. Alternatively some companies do not charge for particular cards: such as a Visa Electron card, or prepaid card, such as the prepaid MasterCard. Weigh up possible savings against any potential loss in consumer protection.
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