Ridiculous or not? Airlines charge fees to use my credit card

When it comes to airline fees, you’ve probably stopped asking yourself, “What’s will they think of next?”

That’s because you thought they’d stop with charging for the first checked bag. But they didn’t. You thought paying for lunch on a six-hour flight was where they’d draw the line. Nope. How about seat reservations — surely they’d be included in the ticket price? Sorry.

So if I told you that you’d soon have to pay for the privilege of paying, that probably wouldn’t sound like a joke. But when I heard from Will Storr, a fellow journalist who lives in England and who had booked flights from Florence, Italy, to London on British Airways, I thought there was some kind of mistake.

Storr was broadsided with a total of $28 in mysterious fees. Like any good journalist, he investigated and found they were credit card fees levied directly by the airline. He says he feels as if the airline “helped itself” to more of his money even after quoting a lower fare through an online travel agency.

Charging customers to pay is highly unusual. In the United States, only one airline, Allegiant, does it. It cleverly avoids the term “credit card fee” because that would violate Visa’s credit card rules and is illegal in 10 states. Instead, it calls them “convenience” fees.

For the convenience of using any of Allegiant’s booking services (inclusive of call center) there is a fee of $17.00 per traveling customer. Purchases made at any of Allegiant is Airport Ticket Offices will not incur a Convenience Fee of $17.00 per customer. All fares are subject to change until confirmed and purchased.

Got that? If you buy a ticket anywhere except the Allegiant ticket office, you have to pay a $17 fee per customer.

European airlines have no such restrictions. For years, no-frills discount airlines have added these credit card fees to their ticket prices. But now the larger air carriers like like British Airways, Lufthansa and Swiss are catching up.

It’s easy to understand why airlines would want to pass the cost of merchant fees along to passengers. They can represent up to two percent of their ticket distribution costs, and at a time when every penny counts, a two percent savings is nothing to sneeze at.

In order to understand how European airlines are rationalizing this decision to us, their passengers, let’s have a look at the recent announcement by Swiss that it would begin imposing a $24 ticketing fee for customers who pay by plastic.

Credit card holders enjoy benefits that extend beyond the ability to make secure non-cash payment. Depending on the card product, such benefits include an extended deadline for settlement of payment and/or the provision of insurance services. Recent years have seen a rise in the related costs, which Swiss has hitherto borne. The introduction of the Optional Payment Charge represents a distribution of the costs on a user-pay basis.

Aha. So Swiss is making the argument that paying by credit card is somehow better, and that customers should be paying more because of it. But isn’t that what your annual fee is for?

Another issue is whether the new fees cover the airline’s cost, or whether they are a source of profit. I think we all know the answer to that one. Airlines aren’t just going to cover their costs; these new fees are certain to become significant source of revenue.

Already, the UK’s Office of Fair Trading has weighed in on this issue, saying it believes there’s “a strong case for a change in the law so that the cost of using a debit card, the almost universal payment method for today’s online consumers, is always included within the headline price.” It is investigating complaints about credit card usage fees.

There are fears that these fees could spread to the United States. Any halfway competent airline revenue manager must be looking across the pond with envy, hoping that the European courts let the fees fly. If they do, they could pave the way for a more widespread acceptance of credit card fees here, and with a little linguistic acrobatics — referring to the surcharge as a “convenience” fee — it’s not inconceivable that a major domestic airline could embrace these surcharges soon.

There are just two small problems, as I see it. First, the airlines charging these fees are being dishonest with themselves and with us. The fees don’t just offset their ticket distribution costs — in almost every case, they also enhance their profits. They make their tickets look cheaper than they actually are.

If cards are too expensive for an airline, then shouldn’t they either stop accepting them or raise their fares? Of course.

My second concern is where this will end. If you’re allowed to charge for using a credit card, can a fee to cover employee salaries, insurance, benefits union dues — or, heaven forbid, CEO bonuses — be far behind?

(Photo: Decla /Flickr)

Christopher Elliott

Christopher Elliott is an author, journalist and consumer advocate. You can read more about him on his personal website or contact him at . Got a question or comment? You can post it on the new forum.

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  • Carver

    The wording of the poll made it impossible for me to vote.  One one hand, I generally believe in letting the market decide business matters.  Legislation is appropriate when the market produces a poor result.

    One the hand I would absolutely refuse to pay a credit card fee.  It’s profiteering at its worse. Although probably not illegal.  I suspect that federal preemption may apply.

    However, I think Chris is crying wolf.  I think paying credit card fees is so anathema to Americans and especially business travelers that I can’t imagine it coming to the US in mass.

    Case in point,  California state courts charge $12.95 to pay a civil court filing fee.  No one pays it. Its a source or derision amongst attorneys.  The only folks who pay it are people who are self represented and don’t know any better or newbie attorneys.

  • Carver

    Let me back track just a little.

    If indeed these fees come to the US, they won’t be levied on frequent fliers.  It is important to note that almost none of the new so called onerous fees, e.g. checked bags, seat selection, etc. are levied on frequent or premium flliers.

  • Dave

    A local bank here has an ad campaign that is worth a chuckle – “Fees? What do we look like, an airline?”.

  • ChrisY

    I’m generally in agreement, except I don’t think it will be above some airlines to charge it.  It would be part of a broader “refocus” on customer service and convenience, but they’d work it in there.

    Rather than try to legislate every minor annoyance of businesses attempting to break down their cost of business, why not take a simple approach?  Any fees that are charged prior to those levied after arrival at the airport (baggage, meals) should be built into the displayed price.  Personally I think that is just good business sense, but if you’re going to make up rules, this seems like it would catch more than going after them piecemeal.

  • $16635417

    Credit card companies hold airline ticket revenue until well after the passenger has flown. That creates a larger cash flow impact for an airline vs. most other businesses. This fee is designed to offset that impact. It MAY be possible that the revenue obtained from a “convenience fee” is available to the airline sooner, hence the logic behind it.

    That being said, most passengers pay for a ticket with a credit card, so this impact is currently figured into the ticket cost. I would find it hard to believe that unbundling in this would help keep base fares low as other fees were designed to do and is just a ‘double dip’ opportunity for the airline.

  • Raven_Altosk

    No, airlines and other companies should be barred from charging “conveinence fees”

    I had a run in with an idiot in an airport coffee shop yesterday. This individual who was working there didn’t want to take my credit card for a $7 charge. He kept babbling in broken English and pointing to a handmade sign that said no charges for orders under $20. 

    I told this person such minimum practices were against the credit card agreement and unless they wanted me to call my credit card company right then and there and report them, they’d take the card.

    A manager came out and told him to take my card as a “favor.” Yeah, he didn’t want to get slapped around by the credit card company type of favor!

    Credit card merchants cannot say “minimum purchase” to anyone. If you see those signs, report the merchants to your credit card companies.

    (Before anyone whines about a $7 charge, I charge everything I can when I travel on business. Makes expense reports much easier)

  • emanon256

    I am very strongly opposed to any business charging credit card processing fees, convenience fees, etc. I worked in accounts receivable for many years and have now work as a consultant in the same business. Yes, companies get charged credit card processing fees. However I would never dream of passing these fees onto my customers, they are merely a cost of doing business and should always be this way.

    I keep seeing business, not just airlines, add these ridiculous fees. Car rental agencies are the worst. My $200 car rental last week was $293. $93 was taxes and fees. Mostly fees. My utility bill is not mostly fees. More fees than usage in many months. I also keep seeing business give discounts if you pay cash, to avoid the Visa rule. 5% off for cash or full price for credit card. I also see many business flat out charge a “Convenience fee” for accepting a credit card. I personally think this is a violation, but most placed get away with it. When I renewed my car registration, there was a 4.5% processing fee blatantly charged for using a credit card.

    I am so sick of everything being added on as a fee. I can justify some fees; if it’s a service that not everyone will use such as an add-on, upgrade, etc. but basic costs of doing business that are universal should NEVER be a fee. Be they fuel surcharge, license fee, tire wear fee, counter fee, franchise fee, train fee, maintenance fee, etc. businesses need to make their prices inclusive of their costs, and compete for my business based on total price and quality of service. Enough said!

  • Jeff I

    Those are the rules in the US – abroad they may differ, and again, it may not technically be a credit card fee, but something to that effect worded differently.
    Also, in Europe, direct bank transfers are used pretty often rather than credit cards, which are far easier for both parties involved, as banks in Europe make it easy make those transactions. There are good alternatives to paying with a credit card, but they aren’t always available to everyone.

  • BillC

    Ridiculous yes but not surprising. There are other companies(at least in Canada) that charge a higher price when you pay by CC. Usually these are smaller businesses that cannot afford the CC charge.  

  • Absherlock

    Does Allegiant charge the “convenience fee” if you pay by credit card at the ticket offices? If not, then it truly is a “convenience fee” rather than a “credit card fee”, similar to the extra buck or two I have to pay to order movie tickets through Fandango rather than at the box office or the three bucks I pay to process my electric bill online instead of mailing in a check. 

    Credit card fees? No.
    Convenience fees (within reason)? I’m okay with this.

  • David Emery

    Well, we could all start carrying wads of cash and pay that way at the airport.  If they don’t like credit cards, they’ll like dealing with large amounts of cash even less!

  • Mary Ellen

    I don’t like it!  Seems really similar to ticket agencies (like ticketmaster) who get away with charging a “convenience fee.”  At least with ticket agencies, there’s usually a reasonable way to avoid the fee, like using the “Will Call” window at the stadium…  

  • cjr001

    There’s a lot of things we couldn’t imagine a lot of businesses doing, yet they’re doing them. This is certainly true of the airline industry.

  • cjr001

    The thing is, everybody knows the rates charged by the credit card companies are outrageous. Yet, our government won’t do anything about it because the lobbying by the credit card companies brings in too much money for the politicians.

  • ce1982

    This is very common for Australian airlines. For example with Qantas it’s $7.70 (including GST). This applies per passenger, per ticket

  • Carver

    I seriously doubt that, “Credit card companies hold airline ticket revenue until well after the passenger has flown”  I also doubt that  “convenience fees are available sooner”

    But if you have some information to the contrary please share.

  • Carver

    In the last few years, the various rules have been in flux.  Its not longer a given than you cannot require a minimum charge.

  • Carver

    Do you mean the interest charged or the merchant fee?

  • john4868

    Chris you really need to do more research before you write these articles.  First, there are different laws and merchant agreements in Europe.  Credit card fees are fairly standard practice in quite a number of European businesses and I have never had one of these fees as a “gotcha” because of the European legal requirements.  Second, categorizing these fees as “dishonest” shows that you are misinformed.
     
    US merchant agreements generally require that a business cannot charge a fee for using a credit card or set minimum transaction limits. This means that the business has to add an additional mark up to every item to cover the merchant fees (which can exceed 3% or the transaction depending on the card and transaction type plus some merchants pay a per transaction fee).  What this actually means to the end user is that cash or check buyers are paying 4%+ more than they would have to in a non-credit card use fee. Paying an unseen fee to not using a payment method seems sillier to me than paying a fee.
     
    Personally, I would rather have the European system where when I choose to pay by cash, I’m not subsidizing those that pay by credit card.

  • Rdking647

    id like to see visa tell an airline that due to their fee the airline can no longer accept visa…

  • emanon256

    Actually the merchant fees were not that bad.  It varied by card. Most had a fixed plus a percentage, the majority were quite low.  AmericanExpress was the highest, so I made a decision not to accept AmericanExpress.  Discover was just a fixed fee, so it netted to the lowest.  I still believe this is part of the cost of doing business. I got a lot more business taking cards than I would have if I didn’t, that clearly off-set any fees I was charged to take them and made a more profit on top of it.

  • emanon256

    How is it a convenience fee? They have to staff the office, so it costs them more when you buy a ticket in the office.  If you buy it on-line and they don’t have to hire someone to interact with you its more convenient for them.  I love taking payments on-line, I don’t have to be involved, and everything comes electronically making it much easier to reconcile.  So letting people pay on-line is more convenient for me as the merchant.

  • http://twitter.com/PeterHarders Peter Harders

    These fees, baked into the carrier’s bottom line “ancillary revenue” column are nothing more than pushing the cost directly to the consumer.  Furthermore, there are more shocking “convenience” fees out there (in the United States and of course in Europe).  Case in point (and biggest offender): Spirit Airlines.  A fee just to book your airline ticket on line, which is the carriers cheapest distribution channel.  The fee, called PUF (Passenger Utilization Fee) applies to all web bookings.  Want to avoid it (so the carrier doesn’t violate FAA regulations)? You have to go to an airport to purchase your ticket (which, yes, is a more expensive distribution channel for any carrier.

  • Tony A.

    Chris, I think you should dig deeper. The real villain are the banks and card processors that charge a merchant fee of about 3% to the vendors. You may not agree with unbundled pricing but the reality is vendors will pass on that 3% to buyers in some way (hidden or not). I’m sure the banks will say they need that money to pay for all the deadbeats’ loans and not executive bonuses.
    For interest readers, please read an excellent article about airline credit card fees here:
    http://www.bcdtravel.com/global/show_document.asp?id=aaaaaaaaaaczcsb
    Here’s another good one:
    http://www.airpluscommunity.com/wp-content/uploads/2009/10/airplus_thewire_1009-3.pdf
    They explain how airlines have passed their merchant fees down the (distribution) line.
    Despicable? Yes. Reality? Yes. When the airline sells a ticket directly to you, then there is no agent to stiff the merchant fee to, so they (the airlines) stiff you instead.

  • emanon256

    “What this actually means to the end user is that cash or check buyers are paying 4%+ more than they would have to in a non-credit card use fee.”

    Or, the business is taking in its gross income, and paying all of its expenses including one monthly merchant statement, and then calculating its net income. 

    You would have to spend a lot more money on accountants to track and reconcile each individual transaction and determine who get what fee and how it goes to the merchant.  I seriously doubt any of this is tracked, and the “Convenience fee” is merely additional profit.  It would actually cost more to track and reconcile who gets a fee and who doesn’t and ensure that fee goes to the merchant processor.

  • emanon256

    It has happened.  I worked with one client who grosses $2Billion a year get told they can no longer accept Visa because they tried charging a transaction fee.  We re-worked all of their processes, but they were suspended for 3 years, so they still can’t take Visa yet.

  • Minormi

    They should be allowed to. But they shouldn’t.

  • Jamie Dimon

     When one notes the fees the banks charge small merchants for the “privilege” of accepting your credit card, it really was a favor for that merchant to take a loss on your purchase for you.

  • Giget

    Here in south central florida, some of the gas stations now raise the the price of gas when you pay at the pump with plastic. They advertise a cash price on the sign, but if you use a credit or debit card the price goes up 8 cents per gallon.

  • Chicky

    I don’t think it’s that far-fetched. Not with Bank of America starting to charge for debit cards in the near future. It’s not right, it’s pure profit for the airlines, IMHO, and I strongly suspect it’s their way of punishing pax who pay by credit card, because they have one extra avenue of dispute if something happens either during the ticketing process or concerning the flight. Cash is always better for the airlines because it leaves a passenger in trouble completely at the mercy of the airlines. Just one woman’s opinion.

  • Mark K

    The “No minimum” rule is gone, thanks in part to the Durbin debit card change that went into effect.  Merchants are now free to require a minimum purchase amount if they choose.

  • bizzilizzit

    “Credit card companies hold airline ticket revenue until well after the passenger has flown.”

    I think most casual flyers, like myself, book their tickets well in advance – my credit card company has paid the airline in September for my flight in December.

  • http://www.facebook.com/profile.php?id=1556838763 Nancy Marine Dickinson

    This is a money grab, pure and simple.  The airlines have decided they don’t want to pay their bills without passing it on to the consumer.  

    How long before we have a charge showing on our ticket for “equipment leasing” or “Counter rental” or “Uniform cleaning”?  At the rate we’re going, before we know it, the airlines will be a purely profit business and it will cost $1000 to fly from TUS to LAX.

  • Brooklyn

    Yes, and then the TSA will flag you for every inspection under the sun (including where the sun don’t shine); cash payment is one of their “markers” for terrorists.

  • Sarah Scrivano

    Pay by credit card, get charged a fee. Pay by cash, and the TSA bans you. You can’t win.

  • Alan

    Like any other horrible policy in travel, this will inevitably be tried in the US. But there’s going to be a legal problem: paying for an airline ticket in cash can be construed as a terrorist act in US law. Gate agents are empowered to call the police, who can then seize your cash if the city happens to need  the money.

    This is going to get interesting…

  • Tia

    So unlike baggage fees or other types of a la carte fees that the passenger to elect not to pay by not utilizing those services, how would one avoid a “convenience fee” for using a credit card if booking online?  What options would be available?

  • BubbeJ

    The use of a credit card and its associated fees is part of the cost of doing business. I am convinced that the people who run airlines never went to business school. They do not know how to run a successful business, except for perhaps Southwest. I would hope that these convenience fees do not make an appearance in the US. They seem to violate the new transparency laws. What I find interesting is that there are so few ticket offices around anymore it would be nearly impossible to go pay with cash or check, so you would be forced to use a credit card. They encourage you to use the web to book tickets, and calling their 800 number incurs a fee as well. Seems like the traveling public is being fleeced no matter which way they turn!

  • Absherlock

    I’m not a merchant, so you would know better than I but here’s my line of thinking…

    They have to staff the office anyway for non-payment related issues (paperwork, other customer service, etc.), so having them process tickets probably doesn’t add much to their workload (or the airline doesn’t care). Plus, I’d imagine that most places “hire” an automated system that processes on-line or by-phone purchases rather than purchasing an in-house system, and this costs money. And it’s a convenience fee because it’s generally more convenient for most people to order their tickets online when it suits their schedule, rather then going to an office that has set hours. 

    Again, I sometimes pay Fandango an extra buck or two per ticket in order to assure that the movie doesn’t sell out before I get there, that I don’t have to stand in the box office line, etc. The theater still mans the box office but we don’t complain about that so much, do we? I’m failing to see the difference…

  • http://pulse.yahoo.com/_HMW3OTJSBDWWRKIEKEKWWM7BEA bc

    EasyJet has done this for years. This is how they advertise €1 tickets and still make a profit. They add on baggage fees, early check in fees, credit card fees, and do you want to sit in a pressurized portion of the cabin fees (joking). I’ve paid the fee because in the end the price of the ticket is still considerably cheaper than on competing airlines. I flew RT from Madrid to Marrakech for < $100 bucks this way.

    The point is, you have to look at the total price of the ticket and then decide if the extra fee is still worth it.

  • john4868

    @yahoo-SYR4YYOAPY4X3UUYLPCADARF3Q:disqus You missed my point. Right now US merchants have to build 4%+ in credit card fees into every sale (just like they have to build in something for overhead, labor etc) because the credit companies require that they not charge someone for using a credit card.

    If they could charge for credit cards at check out instead of having to roll it into the price, the merchant would be able to charge cash customers less. There is no additional burden on the accounting staff as long as you charged a fixed rate (that would probably be the AMEX rewards rate which is over 3.5%) to cover all cards which is basically what the merchant has to do now.

  • DeVon Thomas

    Is this concept so far fetched, that it would never fly in the USA? Well, Bank of America will charge their customers a $5 monthly fee to use their debit card, doesn’t matter if they use it 1x or 20x.  I think this is closer to a reality in the US than people realize.

  • http://twitter.com/sergeishevchuk sergei shevchuk

    US airlines charge a ticketing fee if we go to the airport ticket counter and pay cash. If we’ll have to pay a credit card use fee where is a free option? Also Bank of America will start charging $5 every month you use debit card for purchases due to a new regulation to cap banking fees. I don’t think how it is fair to the consumer to be paying on both ends.

  • Steve R

    Exactly…I blame the credit card companies as much as the merchants here. When a company decides to accept credit cards, it agrees to the terms dictated by Visa (or Master Card, or whoever). One of those terms is that they cannot charge a fee to the consumer for credit card purchases.

    I would argue that the fee charged by Allegiant is clearly a credit card fee, whatever they choose to call it. Virtually no one buys an airline ticket at a ticket office. When buying a ticket online, using a credit or debit card is basically the only way to pay. Thus, they’re charging a credit card fee.

    I would really like to see Visa crack down on this type of thing.

  • Carver

    I disagree

    This is not a favor.  Small merchants accept credit cards because it increases sales.

  • cjr001

    In the end, both are equally outrageous.

  • Stephen0118

    Good one. Although I wouldn’t be surprised if they change their tune soon. Bank of America recently made headlines by charging their customers $5 to use their debit card.

  • Mel

    This reminds me of a restaurant that recently made the news because they’re going to start taking 2% of all tips that are put on credit cards from their serving staff to offset the credit card fees since they don’t “get the revenue from those tips.” Credit card companies so actively solicit our business; they need to figure out how to keep mine if I start being penalized for using them.  I still have a checkbook…somewhere that I can dig out!

  • Carver

    I”m going to have to call BS on this one.  This is a pure money grab.

    Consider: we know that most US based airlines find it cheaper for you to electronically buy than in person or on the phone.  We know this because internet bookings are free whereas phone and in person bookings incur charges designed to discourage that behavior. This is similiar to a bank that has free ATM only checking but charges to speak to a teller

    Ticketmaster and fandango are different animals.  They are third party booking sites wihch aggregate sales from multiple sellers. The so called convenience fees is their polite way of saying, this is our profit.  This fee is unrelated to the method of payment.

    Third party travel booking sites do the same thing.

    Also, airlines use electronic tickets, whereas Ticket Master actually has to deliver physical tickets to you.  So the analagies don’t work

    Curious though, your power company charges you for autodebit.  Lame.

  • Carver

    I see the confusion.

    I believe you are being mislead by the marketing term “convenience fee”  I would argue that a convenience fee implies that the merchant is undertaking an unusual cost, seperate and beyond what is expected in that industry

    For example, my local grocery store charges a convenience fee to shop and deliver groceries.  Since grocery stores don’t usually deliver groceries, an additional fee is appropriate.  Its truly for my convenience and a charge is appropriate.

    However, business have been trying to use that very benign term as a euphemism for credit card processing charge.