Consumer advocacy group Choice has penned a study claiming that fees charged by airlines for processing credit card payments are too high and not in proportion to the amounts involved, with particular disapproval given to Qantas and Tiger Airways.

Most airlines, it seems, charge a flat fee for each passenger and flight, rather than a percentage of the cost involved. The fee then becomes exorbitant and disproportional in the case of budget domestic flights, which of course cost less than overseas flights or business class fares.

The actual cost to merchants for processing credit card payments has been falling in recent years. In June 2009, the cost for Visa, MasterCard, and Bankcard processing was 0.89% of the purchase value, while in June 2005 it was 0.97% and in June 2003 it was 1.43%.

However, Tiger charges a flat “convenience” fee of $6.00 for each passenger on each flight (charging twice in the case of return fares). Qantas charges $7.70 for each passenger on domestic flights and $25 on international ones. Both airlines therefore are surcharging passengers much more than the costs they face.

According to the Choice study, the charges are also high with other airlines but not as disproportionate. For example, Virgin Blue charges $3.50 for domestic flights and $6 for international ones, again charging for each passenger on each flight, while Jetstar charges $3 and $5, respectively.

Representatives from the credit card companies admitted they see this sort of disproportional surcharge regularly and that the lowered fees have not been passed on to the final customer.

Both Qantas and Tiger Airways spokesmen defended the charges by pointing out the fees cover the costs not only of processing credit cards, but also those of bad debt charge offs and fraud prevention.

Source: The Age : No credit given to Qantas and Tiger