Merchants Profiteer by Charging More For Credit Card Transactions By Michael Challiner At Isnare.com Ezine Articles

Retailers, cinemas, airlines and even Government departments are all featured in a list of firms, which have come under fresh attack for the exorbitant fees charged to clients who pay by plastic.

Many organisations are increasing their credit card charges, known as "handling fees" or "merchant fees" and campaigners are worried that these fees are becoming increasingly disproportionate to the costs of processing the transactions. Merchant fees for the main credit cards are between 0.7 per cent and 1 per cent, yet some businesses routinely charge far more to clients who wish to use their credit-cards. This represents a nasty case of profiteering, with firms looking to boost their profits.

These fees are particularly unfair when clients have no choice but to pay by card. Often the organisations try to hide these charges by calling them "merchant fees" when they are really an extra booking fee. Figures show that budget airline EasyJet charges 2.5 per cent of the total booking or a minimum of 3.50 pounds whilst Ryanair charges 4.75 pounds per passenger per single flight.

Similar fees are levied by travel agents, with some charging up to 2.5 per cent. Consumer organisation, which has centred its criticism on the airlines and is calling for them to be fairer. A spokeswoman for the consumer watchdog said, "We want airlines to be far more transparent. In some cases you don't realise you are being charged this merchant fee until your transaction is completed."

We think that if a customer is going to be charged a fee that should know what this charge is for and why it is being charged. If a charge is a genuine reflection of how much it costs to process a transaction, the organisation should be upfront and truthful about it.

Some merchants have reacted to these criticisms by saying that the cost of processing card payments is greater than because they have more processing costs they need to cover. And some firms that charge merchant fees are trying to justify them as "administration charges" for processing card payments.

A spokesman for one firm said: "The charge for using credit cards for online transactions is calculated to cover the costs of providing this payment option. This includes increased operating costs as well as the credit card company charges. Without levying the charge we would be unable to accept credit cards as a method of payment."

A spokesperson from the payment body APACS explained that where a company accepts card transactions, it pays a percentage of the transaction for a credit card payment and a flat fee for debit cards. This fee is part of the financial arrangements between the company and their bank and the level of the fee will depend on the type of business they are in.

For example, the fee paid for an online transaction will differ from that paid by a high-street retailer, while a large company will be able to negotiate a lower fee than a small shop. However, the actual cost is only likely to be "a matter of pence".

What the business decides to charge the client is not just the cost they have to pay the card but includes all their costs of administration including the cost of fraud prevention. The most important thing is that businesses are transparent and truthful about those fees.

We should also point out that there are certain benefits of paying by credit card, provided the transaction is over one hundred pounds. Under Section 75 of the Consumer Credit Act, so long as the payment was one hundred pounds or more, credit card operators can be held liable for a supplier's failure to provide satisfactory goods and services paid by credit card.

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