It seems those exciting-sounding credit cards offered by the banks, offering a range of enticing benefits including money back, free travel insurance and all those desirable-sounding bells and whistles, are not the good-news story they initially seem to be.
They could actually push up the costs of buying ALL goods and services for ALL consumers, claims holiday specialist group The Association of Independent Tour Operators (AITO).
Says AITO Chairman Derek Moore: "Our 140-plus specialist holiday companies have noticed that some client credit card transactions are attracting much higher fees than their usual pre-contracted rates, resulting in their total bills from the banks' merchant acquirers increasing by as much as 1%. Nearly 30% of consumers buying holidays do so by credit card. Based on AITO members' joint turnover of £1 billion per annum, we've done the sums and realise that these higher charges represent an extra unbudgeted cost to AITO's small-to-medium sized member businesses of around £600,000 per annum (on top of the costs already charged by credit card merchant companies). Multiply that across other companies and other sectors, and it's clear that we're all being milked of a lot of money by these organisations.
"We've done some digging, and discovered that this extra cost is down to premium credit cards. Incredibly, businesses cannot tell, when a consumer pays for a purchase by credit card, if it's a normal or a premium credit card. Neither do businesses know until they receive their credit card bills what each bank's merchant acquirer is going to charge them – ie the normal pre-contracted 1.5% to 2% fee or a fee of up to 3%. These are effectively stealth charges, and are as iniquitous as a stealth tax.
"Holiday companies are not high-margin, high-profit businesses. Many AITO members will make as little as 2% to 5% on the sale of their carefully-crafted holidays. To find that such modest margins are hit by unexpected and unbudgeted additional charges is a big shock and we believe it is totally unreasonable. All charges of this type must be transparent, by which we mean that they must be specified clearly and in advance.
"We – and, importantly, consumers - need to know at the point of sale what the card charge to the business will be. Our members can then levy a fair charge on the consumer to cover the additional costs. And of course, armed with this information, consumers can choose to pay with cards that incur lower charges or, alternatively, by low-cost methods such as bank transfer, debit card or cheque. ATOL and other Government-approved financial protection schemes, to which all AITO members subscribe, mean that there's full financial protection in place however payment is made. Transparency is, we believe, essential. It's both good for business and good for the consumer."
What is AITO planning to do? The first step is a letter to the Office of Fair Trading. The next step could be, says Derek Moore, possibly a blanket increase in charges to all users of credit cards. "We hate having to consider increasing costs to all credit card users", says Moore, "but, without any way of identifying the cards that will attract such punitive charges from the banks' merchant acquirers, we simply have no choice.
"What the banks' merchant acquirers are doing is akin to daylight robbery, costing small businesses and consumers millions, and I think we're all fed up with our financial institutions getting away with this sort of scam. Enough is enough, and AITO urges other SME businesses in the travel arena to join forces with us and to protest.
"AITO asks that urgent legislation is brought in to stop banks/their credit card arms being able to charge small businesses – and thus, in turn, their customers – such arbitrary amounts without prior notice. We seek, quite simply, transparency as far as all credit card transactions are concerned."
