Reading the news over the past few weeks you’d be forgiven for thinking that the implementation of the EU Payment Services Directive (commonly known as the credit card fee legislation) has somewhat backfired. The Directive was brought in to protect consumers from having to pay significantly higher fees when paying by credit card compared to other forms of payment. Consumer protection groups rightly argued that it wasn’t fair and successfully campaigned for this change in legislation. But now it has been implemented businesses have hit the headlines for charging consumers a flat fee across all payment methods, which is within the legislation but has understandably left a bad taste for consumers.
It is easy to think the bad guys here are the businesses who were charging consumers an additional fee to pay by credit card and now are going to be charging a fee to pay by any method. But it’s not as simple as that and the story is far from over.
The travel industry, vilified for charging high credit card fees, is one of the industries that has been highlighted in the press as ‘finding loopholes’in the legislation. But why did these businesses have to pass the cost on in the first place? In short, the fee charged by the card handling companies to take the payment is such a significant proportion of their profit margin if not all of it. Yes, most travel businesses total yield is very close to the card handling fee of between 2&3%, and even the ones who make more are still looking at around 2.5% as opposed to, in retail for example, 30-40%. So if they didn’t pass it on there wouldn’t be a business. So what do they do? Avoid an additional fee but put prices up? Charge a fee but get savaged by the press and risk losing customers? Or is there another way?
ABTA has called for “an urgent properly considered review of the card payments system” because actually there is one group still happily profiting from consumers using a credit card over debit card – the card payment companies who are still charging up to 3%! It’s still not clear why the charge is almost 5 times higher to process a credit card payment for a member of the public as opposed to any other form of payment, but the inequality in fees charged to take credit card payments is surely the crux of the issue?
Industry has known this legislation was going to be implemented for a while now and here at Meon Valley Travel we didn’t like the options being presented – charge a fee, put your prices up or absorb the percentage and wipe out the profitability of the business. None of these options benefited our customers yet we like to think of ourselves as consumer champions! So we searched for another way and decided to address the issue at source. Why couldn’t we challenge our card payment providers and reduce the credit card fees we are charged on holiday bookings so they are in line with all the other payment options? Good grief, could it be that simple?
Well, yes! Whilst most other travel businesses are in damage-limitation mode and hoping the costs will be reduced in the future, clarity of thought has enabled us to pioneer a new way, and we’d like to thank our card services provider for addressing and fixing the inequality of payment methods for all our holidaymakers. The fees we pay are now the same for all debit or credit cards accepted.. so no charge to you. We do predict that others will catch up eventually, but in the meantime you the consumer win… and this brilliant new consumer-led legislation has served an honourable purpose and reduced your holiday costs.