Qantas overhauls card payment fees

The new structure will see travellers slugged less for economy short haul flights.

Qantas

Qantas has today announced changes to its card payment fees structure in response to a crackdown on excessive charges by the competition regulator and Reserve Bank.

The moves will see credit card users slugged less for economy short haul flights, although business and first-class travellers will likely feel the sting of higher charges due to a new percentage-based model.

The Australian Competition and Consumer Commission said in May it would enforce harsh penalties on any firm passing on higher costs for card payments than the business incurs in accepting them, with airlines previously singled out as major offenders.

“In short, the new provisions will limit the amount businesses can surcharge customers for use of payment methods such as most credit and debit cards. The limit will be linked to the direct costs of the payment method such as bank fees and terminal costs,” ACCC chairman Rod Sims said.

The new rules force merchants to charge a percentage fee, rather than the flat fee currently in place across the aviation sector.

Qantas said today it would alter its credit card fee to 1.3 per cent, as against a flat $7 currently for domestic and Trans-Tasman flights and $30 for international journeys. The percentage fee will have a cap of $11 for short haul and $70 for long haul flights.

Meanwhile, its debit card fee will be shifted to 0.6 per cent of the total cost, as against $2.50 at the moment for domestic and Trans-Tasman flights and $10 for international.

Debit cards will have the same $11 and $70 caps as credit cards.

On an example $290 return flight from Sydney to Melbourne in August the new fees for a debit card would be $1.74, while the credit card fee would come in at $3.77. In the past the fees would have been $2.50 and $7, respectively.

For a more expensive $1,700 return flight to London there would be a debit card fee of $10.20 or a credit card surcharge of $22.10. This compares to $10 and $30 previously.

Given the percentage fee structure business class and first class passengers will be worse off given they are a lot more expensive than economy prices.

On a $7,500 return flight to Paris in business class customers would be hit with a debit card fee of $45 or a credit card charge of $70 (the maximum cap). This compares unfavourably to $10 and $30 currently.

The new rules come into force on September 1, with Qantas the first airline to formally declare its new fee structure.

However, its current charges will remain until the deadline.

Its decision to charge 0.6 per cent for debit cards comes after the ACCC’s Mr Sims said debit card surcharges should be no more than “around half a per cent”, while he has previously suggested credit card fees should be in the 1 to 1.5 per cent range.

Qantas subsidiary Jetstar currently charges a flat $8.50 fee for domestic flights, while Virgin Australia and Tiger Airways have surcharges of $7.70 and $8.50, respectively.