tip off
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Qantas says it makes nothing from credit card surcharges!

That domestic air fare credit card charge surcharge that Qantas and Virgin Australia miraculously decided should be exactly $7.70 is being outlawed, even though it is to the cent what Qantas says it actually costs. Really!

The reaction of a finance industry contact to Qantas claiming not to make a cent from the credit card surcharges it places on bookings was not what you would expect from disbelieving consumers.

No siree. It was, with a few rude words deleted, that “if those fools can’t even make a buck out of a …..ing  credit card surcharge they are …..ing unbelievably incompetent [persons].”

Strong words indeed. The exchange was set in motion by a Travellers Check feature by Clive Dorman in the Fairfax media, drawing attention to the fact that the airline card fee surcharges would be subject to new RBA rules in March that would end, or ban, surcharge ‘gouging’.

Did Qantas have a statement in response to this issue? It did.

” We are assessing the new RBA guidelines and will make a decision about any changes in our surcharging policy once the credit card companies publish their responses, which has not yet happened.  

“The Reserve Bank has made it clear that merchants such as Qantas may continue to recover the reasonable costs of accepting credit cards – which are more extensive than just the merchant service fee charged by card companies.  

“Qantas has never recovered more through surcharges than it costs us to accept credit card payments in the first place.  Claims that we make a profit from them are wrong.”

Dilemma. My finance guru who takes everything Qantas says as gospel (causing us to disagree, quite a lot) is aghast that the airline is so totally incompetent that it can’t even make money ripping off consumers, which is what the finance industry in general regards as a proper, legitimate and even sacred duty by a listed company.

On the other side of the street, baying for blood, will be the consumer advocates who will say that Qantas is totally unbelievable and engaged in the wholesale ripping off for a service that would cost it next to nothing.

Me?  Well, it’s another reminder that if you want to make money, you don’t actually go out and provide a tangible product, like a seat on a flight, you just invent a fee to apply to the product, and then cream it off the top of the sales revenue until some killjoy comes along and says ‘naughty’ and then you go and devise an even better ripoff.

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  • 1
    Nick Brodie
    Posted January 21, 2013 at 5:01 pm | Permalink

    Credit card gouging aside – what really takes the cake is the so-called ‘max’ bundles offered on JQ. You can book a non-sale (full fare) JQ MEL-SIN flight in ‘business’ and pay $699 + $200 max bundle ($899 total) to get the perks. However, during sale time the fare drops to something like $499 but the ‘max’ bundle skyrockets to $600 – WTF is with that? It’s more expensive to fly on a sale fare than it is on a non-sale fare if you want the ‘max’ bundle! To make matters worse there is no option to buy a non-sale ‘full fare’ product during a sale. Complicating the matter further is the clarity of their fare conditions – for example, if I booked a non-sale ‘business’ fare and ‘max’ bundled it would I be able to make a no-fee change to fly on a date within a designated sale period when the fare is cheaper but the ‘max’ bundle higher……? Theoretically I should.
    I can’t work it out.

  • 2
    Mark Parker
    Posted January 21, 2013 at 5:39 pm | Permalink

    It’s not just the airlines Ben, hotels have been engaging in this for sometime now with their pathetic 1.5% credit card surcharge – which to be blunt is even more of a gouge than the Qantas flat fee.

    I run a small ecommerce store trading across countries and my transaction volumes and $$ are no where near an average hotel or airline – yet my CC surcharge fee is less than 1.5% – so either the hotels/airlines are negotiating really bad merchant deals or they are treating credit card payments as a profit centre…And let me add, AMEX approached us a year or so ago with an offer to reduce their merchant fees IF we didn’t apply a surcharge for using their card – this was really attractive for us – so if AMEX will offer that to a micro merchant – why do some hotel chains, booking aggregator sites (like the mongrels at Wotif), and airlines penalise customers for using AMEX?

    Given the volumes these guys are processing every day – I do find the Qantas statement to be in the Lance Armstrong league of believability – but having said that – the complexities of managing multi-currencies via internet transactions is massive – the banks are disgraceful in terms of how hard they make it for vendors to allow customers to trade in their home currency.

    It took me 9 months to get a NZD merchant account sorted out with NAB – you simply wouldn’t believe the extortionist fees, delayed payments, plus annual fees that the banks force merchants to pay when they want to deal with more than one currency.

    So in summary – dig a little deeper, maybe this is a B/E play for Qantas?

    It’s a stupidly complex space whereby the banks, payment gateway companies, and the credit card providers are able to make hay – so to speak…

  • 3
    Harry Rogers
    Posted January 21, 2013 at 6:35 pm | Permalink

    Well said Ben it looks like the holiday break has given you a new lease of life. I’m always happy to go down with the “ship” if the truth is revealed.

    All strength to you.

  • 4
    Mark Skinner
    Posted January 21, 2013 at 7:25 pm | Permalink

    I sort of feel sympathy for Qantas in this. If one goes overseas, and uses a card, one gets charged:

    A fee from the ATM/merchant overseas up to 3%
    A fee from our own worthy bank up to 3%
    A conversion fee (arbitrage) 2% (sometimes more depending on the bank).

    So the banks may get 8% of one’s card transactions for a holiday. If you go overseas and spend $4000 cash from ATMs you might pay $300 in bank fees.

    Based on that, the $7.70 on an average airfare is not a big deal – in fact it is considerably less than we are being gouged by the banks for the privilege of using their cards (and don’t forget the annual card fee to add on top of it all).

    Further, I would prefer the fees to be up front in principle at least, so that we know what we are paying. It is that lack of transparency that lets the banks get away with taking up to 8% of the price of my overseas trips.

    I guess where I do agree with the forcing of the fee to be included is that since it is an unavoidable fee, why make it an extra step to pay?

    Maybe the issue is that by charging a flat fee, the airline has the short haul passenger subsidising the longer haul passenger.

  • 5
    Harry Rogers
    Posted January 21, 2013 at 7:46 pm | Permalink

    Mark,
    There is a card out there owned by GE that charges no fees for transactions. When OS they state that the machine owner is required to state the fee before you press OK. In the US it is typically $2.

    The exchange rate conversion is usually much better with this GE card than others because of the enormous buying power of GE.

    Simple solutions like putting your card into credit before leaving solves the cash withdrawal fees (not easy for somebody who borrows for a holiday).

    Originally the credit card companies mad the money from the seller and the seller adjusted his sale price for this. Its called running a business.

  • 6
    Ben Sandilands
    Posted January 21, 2013 at 7:54 pm | Permalink

    Disagree. These new rules apply to surcharges only on bookings made in Australia, where Qantas will charge in Australian dollars. The flat domestic charge makes no sense as it has nothing to do with complicating the booking process. It is final sum on the booking screen paid for by credit card. That is, it is just a payment process. It could be online books or clothes or groceries. For Qantas not to make any money on $7.70 for that process, if we accept the statement, suggests truly serious failings in its business processes. That said, if you are spending a substantial sum on a domestic business class fare you will at the higher end of the price range end up paying more if for example the fee was 1% of the fare.

  • 7
    Mark Parker
    Posted January 21, 2013 at 8:22 pm | Permalink

    Harry
    With all due respect, I think you’ve missed the point of my comment completely…

    It’s all well and good to cite the range of ‘vendor-sponsored’ cards that offer no/low/minimal trans fees – but the key issue at the heart of Ben’s post is 100% from the merchant side – and this is where it gets complex, expensive, and ugly – this is not about what you pay but about how merchants are burned and buried in complex fees and veiled threats…

    3 years ago my company had to deal with 2 or 3 merchant fee rates based on card type – I pinged my accounts team tonight when writing my original comment and copped a barrage of venting/angst/anger at how complex the space has become – standard cards, premium cards, special cards, o/s standard cards, special debit cards…all with their own special merchant rate…

    What Ben may not be privy to (and hence my veiled suggestion that ‘we’ need to dig deeper on this issue) is the fact that this isn’t “a service that would cost it next to nothing”.

    For every option you as a consumer has to minimise fees or transaction costs, the banks and payment gateways are scheming to penalise the merchant. And the issue becomes stupidly complex once you add in multiple currencies…so next time you’re on Qantas.com, virginaustralia.com, wiggle.com.au or any truly global merchant site (with the exception of Amazon who still feels that USD is the worlds only currency) just remember that the vendor is being penalised for giving you currency surety.

    Oh, and spare me the hubris re GE – they are a global merchant of debt and have corporate morals that barely stack up to to the numerous vendors of financial depression who we also know as those who promote pokies as family entertainment…

  • 8
    Harry Rogers
    Posted January 21, 2013 at 9:10 pm | Permalink

    Sorry Mark Parker I was referring to Mark Skinners comment.

    In regard to GE I wasn’t professing their moral position just the point from a consumer point of view. Moral financier.. perhaps a contradiction in terms.

    Having some experience in foreign exchange and dealing in many currencies I sympathise with your plight particularly on small value transactions. I dont suspect that there is a solution to this because all settlements worldwide go through one or two places and they all want their feee even though in banking the computer now automatically do the debit and credits.

  • 9
    Mark Parker
    Posted January 21, 2013 at 9:27 pm | Permalink

    Hi Harry
    LOL – understood – god I wish Crikey would allow in-comment threading…

    And yes – given your comment re international transactions – clearly we are both on the same page…

    cheers Mark (the P one, not the S one!)

  • 10
    moa999
    Posted January 21, 2013 at 10:02 pm | Permalink

    While I agree that Qantas ‘should’ be making money.

    The $7 fee on the $2000 business Syd-Per return (at 0.35%) is a loss-leader – and effectively subsidising cheap frequent flyer points via the credit card for the fat cats.

    Even better the $30 fee on a $10,000+ fare to London.

  • 11
    Mark Skinner
    Posted January 22, 2013 at 8:10 am | Permalink

    Hi Harry, and thanks. A couple of things. First for the free GE card. Yes, that may be free for the card holder – but I bet it is not free for the merchant. So I still have sympathy for Qantas/Virgin and the charge. That was the original point of my post…unless of course GE in its infinite mercy does not charge the merchant.

    Next. I always have my credit card in credit (living in the fast lane of the two speed economy has its benefits), but the banks (and AMEX and Diners) still charge an overseas transaction fee plus the arbitrage. The process you described used to work, but the banks saw that loophole and closed it a couple of years back. If you have the GE card, you might not have noticed that (at your own profit). LOL.

    While your point is taken that people can often get better deals than the straight 3%+2%+3% that vanilla card accounts charge, by the time you add the merchant charges (which somewhere somehow the customer ends up paying), the amount of $7.70 charged by Qantas still looks more than reasonable.

    I was also questioning whether or not the regulator’s direction to Qantas and Virgin to delete the fee was more related to making sure that the advertised price was what is eventually paid, rather than a regulatory swipe at the cost of the charge itself.

  • 12
    Harry Rogers
    Posted January 22, 2013 at 8:54 am | Permalink

    Mark S.

    Yes all your points are valid.

  • 13
    Treenan
    Posted January 22, 2013 at 9:20 am | Permalink

    Forgotten in all of these debates is that when credit cards were first introduced, merchants signed up in droves, quite happy to pay fees that were much higher than now and absorb them, because the costs of handling were *far less* than the costs of handling cash. And payment was guaranteed.

  • 14
    Posted January 22, 2013 at 1:47 pm | Permalink

    Treenan wins. The reason Qantas’s card fees (and merchant fees levied on consumers in general) are outrageous is because *they are an essential part of its ability to do business* – you can’t drive out to Mascot and hand Qantas $2000 in cash over the counter, and if you could and everyone did, then it would cost Qantas far more than the sub-1.5% merchant fee it pays on CC transactions.

    (the discussion about using cards overseas is a complete sideshow. Yes, you get stiffed for using cards overseas. But here, we’re talking about Australians using Australian cards with an Australian merchant…)

  • 15
    jean cullen
    Posted May 24, 2013 at 4:00 pm | Permalink

    Are you ready to pay checkout charges when you use your credit card? In 80 percent of U.S. states, consumers will soon have to pay checkout fees each time they pay with a credit card. If you aren’t paying attention, banking institutions will squeeze you to death with fees. What about the antitrust ruling on swipe fees? Temporary relief! A personal loan can help you pay for your checkout fees.

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