Rip-off credit and debit card charges could be on the way out as the Office of Fair Trading promises a crackdown.
Airlines and other travel firms have been ordered to stop imposing rip-off charges on customers when they book trips with debit and credit cards.
An investigation by the Office of Fair Trading (OFT) into card surcharges found that the fees – which are most commonly levied by travel companies – were often excessive and unjustified. The OFT estimated that UK consumers spent £300 million on payment charges to airlines alone in 2009.
It has told companies to stop imposing surcharges on debit cards, and reduce the fees applied to credit cards, or face legal action.
The OFT investigation followed an official complaint by consumer organisation Which?, which said these card charges were unfair.
Which? said the surcharges paid by consumers were in many cases significantly higher than the actual costs faced by retailers for processing card payments.
The worst offenders
These card surcharges have become increasingly common and budget airlines are among the worst offenders.
Ryanair charges £6 per passenger per one-way flight if they pay with a credit or debit card. This means a family of four would pay £48 extra for a return trip.
EasyJet charges £8 for debit card payments and for credit card payments the cost is even higher - £8 plus an extra £4.95 or 2.5 per cent of the flight price, whichever is higher.
What the OFT investigation found
The OFT focused on the passenger transport sector where it found considerable evidence of companies using “drip pricing” practices for surcharges online – this means adding payment charges to the total price only after consumers have navigated through a number of web pages during their purchase.
The organisation also ruled that card surcharges were misleading, particularly when avoiding them was only possible for a small proportion of consumers.
For example, Ryanair customers are not charged if they use a MasterCard prepaid debit card – but less than 5 per cent of UK adults have one. Similarly, easyJet customers do not have to pay to book if they use a Visa Electron Card – but only 11 per cent of UK adults have one.
Cavendish Elithorn, senior director of the OFT's goods and consumer group, said card surcharges were frustrating consumers.
“You can't buy online with cash and people are frustrated about being asked to pay for paying.
“Consumers find it harder to shop around and find the best deal if they have to invest time and effort in discovering surcharges.”
What is the OFT going to do about it?
The OFT has promised tough action saying travel companies must change misleading debit and credit card surcharging practices or face enforcement action under consumer protection laws.
It says traders should stop charging for paying by debit card – which it describes as the “online equivalent to cash”.
And the OFT says charges for paying by credit card should be made more transparent so that whenever prices are displayed on a website, surcharges must be made clearly available via a single click rather than being revealed at a late stage in the shopping process.
The OFT also says retailers should clearly reference card surcharges on any advertising material when prices are being promoted.
In the longer term, it has called on the government to ban debit card charges altogether.
Hidden charges and booking fees came top of a recent Confused.com poll of “most annoying rip-offs” so the OFT’s ruling is welcome. Hopefully, a better deal for consumers will be on the way sooner rather than later.
The goverment should'nt stop there with airlines they should'nt charge people more for trips in the school holidays.How do they justify extra cost.Its hard enough for the average family at the moment without being ripped off when your trying to get away from it all.
Posted by: Peter Manley | 07/06/2011 at 08:18 PM