Qantas Taking Advantage Of Their Passengers

The internet has changed alot about our lives in one way by making the way we purchase things much more simple including purchasing flights.

You no longer have to pick up the phone to someone. Now just jump online, see the flights and punch in your credit card details. Extremly simple you would have to agree. But there is a down side to this. Airlines have now started charging merchant fees directly to their passengers.

What is a merchant fee you ask? When making purchases with a credit card a small portion is taken away in merchant fees. This is a fee that bank/credit card companies has laid upon businesses for accepting payments via a credit card. This fee is there to help the banks/credit card company make a profit.

Back in 2002 the Australian goverment allowed businesses to start charging this fee directly to their customers. For example there is a service station near my house. When you pay for your fuel they say if you want to pay by credit card there is 1.5% surcharge on you fuel. Instead of the service   station taking the loss you now take the loss. This adds to your overall cost. If you purchased $40 worth of fuel from this service station with you credit card you would be charged a addtional 0.60 cents. Most businesses never charged more than this 1.5% of the total bill. As this is exactly what they get charged.

However most businesses like mine and many others dont pass on this fee to there customers. The business pays it.

Qantas (Australias biggest and oldest airlines) have taken this to a new level. They have started charging a flat credit card fee of $7.70. This fee is per customer and per flight (eg you pay it twice on a return flight).

What makes this fee ludricus is that it is regardless of what you spend! Find a cheap $60 flight you get charged $7.70.

Lets give a real life example. Jumping on to the Qantas website I want to book a real life oneway flight from Adelaide to Melbourne on the 14/06/2010. Looking at all the flights, there is one flight qf670 that leaves at 6:05 am. This flight costs $95.

Now if we paid this cost with our credit card, qantas would be hit with a merchant fee of 1.5% of the total. So they would have to pay $1.42 to there bank/credit card company. However they are charging me $7.70. As you can imagine they would pocket the remaining $6.28.

There is a big BUT here! As a very small company we pay 1.5% on credit card transactions. As a big company (like QANTAS) they can negotiate better deals. So they might even pay as low as 0.75%. If this where the case they would be pocketing $6.99 on this transaction.

Plus this fee is for each passenger. If you where booking a family of four on this trip you would be charged $30.80!!! All the while for them they are only paying bewteen $2.85 and $5.70. Thats a tidy profit.

However this fee seems to be capped at $7.70. For example on the same day if I purchased a ticket on flight qf774 going to melbourne in there business class section this would cost me $1220. Normally if a retailer where going to pass on this 1.5% merchant fee for there customer. We would be forced to pay $18.30. But QANTAS only charge $7.70.

So what it seems they are doing are subsidising there higher spend customers, with higher charges from lower spend customers. How can this be legal!

Imagine if the same was done with Tax. A goverment said we are going to charge a flat dollar ammount on Income tax. For example $100 a week tax. This would help the rich and hurt the poor. As if you are earning $500 a week before tax 20% of your money would be gone. However if you where earning $1200 a week befour tax only 8.33% would be gone.

Qantas has made the desison to charge smaller more inexpensive flights a higher total percentage of the cost. While bigger more expensive flights get there credit card charges subsidised. MADNESS!

However this is not where it ends. Tiger airways charges a $6.00 flat fee. Jetstar charges $3.50 flat fee. Virgin charges $3.50. And remeber this is per person, per flight. Regardless if you book all passengers and flight on the same day at the same time.

There is no way that these charges are fair. Even  Chris Clark (in a choice magazine artical 18^th Sept 2009), Visa's General Manager for Australia recently said says some merchants have turned surcharging into a "profit centre"."There is no justification for merchants to impose surcharges that exceed their cost of accepting cards. If a merchant does apply a surcharge, the amount should be clearly disclosed at the time of purchase and it should bear a reasonable relationship to the merchant's cost of accepting a card for payment."

Eddie Grobler, (in a choice magazine artical 18^th Sept 2009), Executive Vice-President, MasterCard Australasia, agrees that some merchants are surcharging to generate an additional revenue stream. "Indeed, many merchants that surcharge for card payments do so when cards are the only form of payment available to the consumer. This fee is often completely disproportionate, and in many cases unrelated, to the cost incurred by the merchant for handling the card. Some merchants have been known to charge up to 10% extra for accepting a credit or debit card."

When you have the heads of credit card companys calling airlines fees “completely disproportionate” this is a problem.

While we at Mr Home Budget believe these fees are an outrage. There is a simple answer. Get rid of your credit cards. Cut them up. Cancel them. Send them on a rocket to the moon. How you get them out of your life dose not matter. But not using them is the main thing. Even if the airlines charged only the 1.5% (a correct fair amount) they get charged for using a credit card this would still be adding more to your bill. Avoid this charge by not using any credit cards.