Published on Thursday, July 20, 2017

Debit and credit card surcharge ban will cost agents millions

A looming ban on debit and credit card charges will cost the travel industry up to £150 million, according to consultancy firm RSM.

From 13 January next year, the second EU Payment Services Directive, known as PSD2, will ban surcharging for credit and debit card payments for most transactions, including for flight and holiday bookings instore and online.

Under the current rules, businesses are not allowed to profit from surcharging but the actual costs they incur can be passed on. When the new rules preventing this kick in, there could be an impact to the bottom line, says RSM.

The UK Cards Association's latest card expenditure statistics for the year to April 2017 shows that consumer credit card spend with travel agents was £7.5 billion. Based on charges of between 0.5% and 2% of transaction value, this indicates a cost implication in the range of between £35 million and £150 million across the sector.

"As a result, travel operators face some difficult choices as to whether they choose to absorb the additional costs or pass them on to consumers in the form of increased headline prices or new booking fees," said RSM's head of travel and tourism Ian Bell.

"Travel agents may also wish to consider offering alternative payment method options."

Agents also need to be mindful of transition date, he warned. The payment of balances after the 13 January 2018 for bookings made before this date will not be able to levy surcharges.

Bell added: 'This may seem like a fairly minor change, but travel agents who currently pass on their card costs to consumers may well feel a significant hit when the new rules start to bite next year.

"Many will no doubt consider raising headline prices in response, but nobody wants to be the first to jump. At a time when agents are already experiencing margin squeeze, firms need to consider their options now to ensure they don't suffer a financial headache in the New Year."

Advantage Travel Partnership said it will launch advice and guidelines for members later this summer, following an in-depth consultation period.

"As a consortium that represents the largest group of UK independent travel agents with collective sales of £3.6 billion in 2016, the credit card fee changes will have a big impact on our members' and their business models," said managing direct Julia Lo-Bue Said.

"We agree that the removal of fees for consumers is a positive move to boosting consumer rights, however we also need to be mindful of the impact that it will have on small businesses including high street agents.

"From January 2018, businesses will not only have to absorb credit card fees but increases to debit card payment fees too. These will be on top of existing bank processing costs already incurred by businesses.

"Consumers should also be aware that currently the rules set to start in 2018 will apply to MasterCard and Visa credit or debit cards, plus Amex and Paypal; those who use Diners and commercial cards may still incur a credit card payment fee."

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  • Easy solution cash discounts

    Prices will have to rise 2-3% to cover amex. Then just offer similar cash discounts. Also why do agents not charge more when few people only want to pay a deposit upfront rather than full payment?

    By Michael Anderson, Friday, July 21, 2017

  • Charge at cost of finance

    Just charge the same percentage that the credit card companies charge them, or people paying by debit card (usually minimal charge, not a %) or direct transfer/cash will have to pay more. Credit cards offer greater protection so more people would use them, putting up costs for all.

    By Sylvia Cook, Thursday, July 20, 2017


    This subject keeps cropping up with the same responses that travel agents are making money out of credit card transactions. As a small tour operator we absorb the high cost of these transactions as we think it looks petty to itemise these costs. However, some cards attract a very high rate of commission to Worldpay - who let's face it own the industry now. Someone has to pay for the Americans getting Air Miles! The last commentator here responded to me by telling me to take cash only.

    By Irene Laird, Thursday, July 20, 2017

  • Why a full ban?

    Agreed, some firms like airlines do take the mick on fees, so why not just outlaw all fees above 2%, that way the agents, tour operators etc don't get totally screwed financially. This should not just be all about the consumers rights, this needs to be made fair all round.

    By Keith Standen, Thursday, July 20, 2017

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