Making Money Work

End of rip-off card charges: travellers to benefit

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.

An Oscar-winning documentary investigates the financial crisis - we have five copies up for grabs

Three years after the worst financial meltdown in recent history and "not a single financial executive has gone to jail", says Charles Ferguson, director of the new Oscar-winning documentary Inside Job.   

Inside Job won Best Documentary Feature at last year’s Academy Awards and it’s easy to see why. This powerful account of the economic crisis of 2008 will leave you feeling enraged that no-one has been brought to account for the global financial meltdown that has affected us all.

We’ve all felt the pinch of the so-called credit crunch, from first time buyers unable to secure a mortgage due to lenders no longer extending credit, to rising inflation eating into our buying power.

Inside Job examines the reason behind the financial failure and concludes that greed, a loosening of financial regulation, and a lack of accountability by those in charge is to blame.

Indeed, the focus of Ferguson’s firm is on the fact that no one among the financiers, politicians and academics who contributed to the crisis has been called to account for their role.

‘A heist movie’

In fact, according to Ferguson, many are still working in the industry and are earning even more money now than they were then.

In an interview with BBC News Online, the director said: “The essence of what happened is quite simple.

“It's a heist movie - but the heist was conducted by the people running the banks rather than by people walking into the banks with guns.

“I think it's important for people to understand the role that the political system played and the role that academia played."

Inside Job, out now on DVD, features exclusive interviews with major financial insiders, politicians, journalists and academics. 

Boom and bust

Narrated by Hollywood actor Matt Damon, the documentary starts with a look at the boom years that preceded the bust.

What emerges is a tale of financial deregulation which led to ever more risky and complex financial ventures which were packaged as safe investments and sold from investor to investor and which, when seen for the worthless investments they were, triggered the start of the global economic crisis which haunts us to this day.

The problem with explaining the global economic crisis is that, like the complex financial ventures being traded before the storm, it’s a devil to try and explain in layman’s terms what actually happened.

Fortunately for the viewer, Inside Job goes a long way to breaking it down and contends that the crisis could have been avoided.

A similar account of the financial crisis is the BBC’s excellent three-part documentary The Love of Money, which aired in September 2009.

If you can find a copy, I’d recommend it as an informative and engaging companion to Inside Job, particularly as it covers the financial crisis from a British point of view, with interviews with then Prime Minister Gordon Brown and then-chancellor Alistair Darling.

Inside Job is available on DVD now, courtesy of Sony Pictures Home Entertainment. We have five copies to give away. To be in with a chance of winning, answer the following question: “Which Hollywood actor narrates the documentary Inside Job?”

To enter, email editor@confused.com with your answer in the subject line. Please put your full name, date of birth and postal address in the body of the email. 

Closing date for entries is 2359 on 23 June 2011. Only one entry per person. Please find full terms and conditions here.