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Published on Wednesday, March 15, 2017

Survival of independents threatened by EU directive on credit card charges

A new directive preventing companies from passing credit card charges onto consumers threatens the survival of independent travel agents and tour operators, says AITO chairman Derek Moore.

He said many don't make sufficient profit to absorb the 2% charge levied by the card providers.

And he warned that credit card companies might increase their charges if the move leads to more consumers paying for their holiday with plastic, which will push up holiday costs.

HM Treasury asked the industry for feedback on the planned Second Payment Services Directive, which has been put forward by the EU.

"Consultation on this little gem launched in the first week of February 2017, with an original deadline for responses of March 13," said Moore.

"Happily, on March 9, the deadline was extended generously to March 16, so AITO's been burning the midnight oil to get its response to the Treasury in time."

Moore said that passing the 2% credit card charges onto consumers was vital to the survival of travel agencies that earn only 10% to 11% commission on sales.

"This directive will seriously affect their livelihoods," he said.

He said the situation was the same for AITO specialist tour operators, many of whom 'gently discourage' consumers from paying by credit card, pointing out that they are fully bonded so they don't need the protection offered by credit card issuers.

"Once the Government's implicit encouragement to the general public to pay for more of their purchases by credit card is in action, holiday costs will of course go up because tour operators work on such slim margins (pre-tax profits of around 1% to 2% are the norm) that there is simply no way of absorbing such additional costs," added Moore.

"This backward step is, AITO believes, to the definite disadvantage of the holiday-buying public and to consumers generally."

Moore said it was also wrong for the Government to encourage people to pay for holidays 'on the never-never'.~"Are they trying to help our beleaguered banks by pushing more business their way?" he asked.

He warned that ending credit card charges for consumers was likely to lead to a rise in use, which might lead to higher charges.

"The credit card industry is likely to perceive a higher risk to them with more travel business going their way, meaning that they will probably charge holiday companies even more than they are at present.~

"The impact of this move will mean that every consumer is adversely affected - even those who normally benefit from a lower price when choosing to pay by a debit card or cheque.~

"The public will be by far the loser rather than the beneficiary as a result of this new regulation - the polar opposite, we are sure, of its instigators' aims."

The Second Payment Services Directive (PSD2) is due to become law in the UK by January 2018.

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  • Bank transfers rooL OK

    In Germany, it's really common for people to pay distance purchases via bank transfer. For some reason it's not so popular in the UK. We pass on card charges exactly, to the penny, to the customer but we also offer a straight forward bank transfer service which costs nothing - they understand that this gives them a real choice, between the 'original' lower price or the one that includes the actual cost of CC 'convenience'. Over a few years, they've got the hang of it. OK, new customers sometimes use a card the first time then realise they're paying a private tax to the card co for no reason. Now 85-90% of payments come in via bank transfer. As a result, if we were forced to absorb CC charges, 90% of our customers would have to pay more so I think we'd probably just stop accepting cards at all.

    By ex Severn, Friday, March 31, 2017


    To Easy Solution: How do you pay for your holidays?

    By Irene Laird, Thursday, March 16, 2017

  • easy solution

    1) stop taking credit cards or 2) tell potential clients, you no longer take credit cards, but will accept Paypal payments, where they can use Amex/Visa/Mastercard which will cost them around 1.95%

    By Michael Anderson, Thursday, March 16, 2017


    As a small company our average credit card transaction is almost 5%. This works out as follows:-Mastercard is dearer than Visa. Certain "business" cards attract a higher rate as does Overseas registered cards and "customer not present". Combine all this with the monthly terminal hire charge and VAT and its almost 5%

    By Irene Laird, Wednesday, March 15, 2017

  • Debit Card Charges are no longer flat / capped

    The previous post "debit card charge often less than a £1". Not so - the flat charge and cap for Debit Cards was removed last year. Now all Debit Cards now attract a % fee (0.20% interchange + scheme fees + processing fees, versus 0.30% interchange for credit cards + scheme fees + processing fees.

    By Jo Balchin, Wednesday, March 15, 2017

  • Flyglobespan

    Mismanagement by Credit Card handlers led to the demise of Flyglobespan. Did they fall or were they pushed?

    By Joe Curry, Wednesday, March 15, 2017

  • Credit Card Charges

    I suspect the complainst started because Agents and others were making a profit on Credit Card charges. Using Worldpay and other providers the credit card charge is less than 2% and debit card charge often less than a £1. I am not sure that the argument that the credit card industry is seen as a bigger risk stands up. More credit card transactions should lower the cost>

    By Paul Johnston, Wednesday, March 15, 2017

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