Monday 20 November 2017

Who makes a 5,000% mark up on credit cards?

Most airline companies and retailers are making mark-ups of up to 5,000 per cent when they charge outrageously for handling our credit- and debit-card bookings, writes Louise McBride

THEY say not to leave home without it -- yet we could save tens, if not millions, of euro a year if we used our credit, debit and laser cards less.

Many travel companies and retailers lob hefty charges on to consumers who use their credit or debit cards to pay for something -- even though the actual cost to the retailer of handling that card payment is a tiny fraction of what is charged to the consumer.

In Britain, consumers are forking out more than €330m a year in credit and debit card surcharges, according to the British consumer watchdog, the Office of Fair Trading. The watchdog has recently called on travel companies to stop lobbing debit card surcharges on to consumers.

The trouble with card surcharges is that it is almost impossible to avoid them. The winding down of high street airline branches means that if you don't have a credit, debit or laser card, you usually can't book a flight for example.

Card surcharges are called a raft of things by those charging them -- including handling fees, booking fees and administration fees.

Ryanair pocketed €252m last year from card surcharges, according to Senator Feargal Quinn. Ryanair has dismissed Quinn's claim, stating that the airline does not charge credit- or debit-card fees.

A Ryanair spokesman described the €6 fee charged per passenger per one-way flight as an "administration fee".

"Our administration fee is associated with the costs of keeping over 20 separate booking systems live, updated and secure," said the spokesman, who also added that the fee was "avoidable". Dress it up whatever way you like, if you're using a credit, debit or laser card to book a flight with Ryanair, you'll usually be charged a €12 fee per passenger.

The only way you can avoid Ryanair's "administration fee" is by using a MasterCard Prepaid Debit Card -- which most of us don't have.

Aer Lingus and Aer Arann also usually charge €12 per return flight per passenger if you use your credit, debit or laser card to book a flight with them. Yet, if the cost of your return flight is €50, it could cost your airline as little as 25¢ to process a credit- or debit-card payment in this case -- almost 50 times less than the credit or debit card surcharge it hits you with.

Una Dillon, head of card services with the Irish Payments Services Organisation (IPSO), says it could cost as little as 0.5 per cent of the value of the goods you buy to process a credit-card payment.

The first cost borne by a retailer or travel company to process a card payment is an interchange fee to the bank which issued your card. This fee effectively guarantees that the payment goes through. As the interchange fee is usually no more than 10¢, it is tiny.

Retailers and travel companies also pay a monthly merchant service charge to their acquiring bank -- the bank or financial institution that accepts card payments for products or services on their behalf.

"This charge will include transaction fees, terminal rental (if a card machine is being rented), administration fees, customer services, and sundries such as till rolls and so on," said Dillon. "It is the charges for these services, added to the interchange fees, that makes up the total charged to shops for each payment made by card.

"While some acquiring banks charge a flat fee per transaction, especially for debit card sales, they mostly charge an ad valorem fee on sales, for example, between 0.5 and 1.5 per cent of the value of sales."

In most cases, the bigger the retailer or travel company, the smaller the cost to them of processing your credit or debit card payment.

"Credit and debit card booking fees should be justifiable," says Dillon. "Anything that acts as a barrier to electronic payments is a negative thing. Cardholders should question fees that are excessive."

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