Page last updated at 14:38 GMT, Saturday, 28 November 2009

Visa Electron cards to be phased out

By Bob Howard
Reporter, Radio 4's Money Box

Plane in flight
Airline customers can face sizeable card-handling fees

A card payment service commonly used by customers to avoid high transaction charges when booking flights is being phased out by two major providers.

Customers who pay by Visa Electron are not charged transaction fees by airlines such as Ryanair, Aer Lingus, BMIbaby, Easyjet and Flybe.

Abbey and Travelex have told BBC Radio 4's Money Box their cards will not feature Visa Electron by next year.

But another banking group, HBOS said it would continue to offer the card.

High charges

Several airlines now charge a flat fee transaction charge per person, per flight, when customers pay by debit or credit card.

I paid £5 per person, per leg of the journey. I think they're coining it in
Vic, Ryanair customer

It can add up to a substantial part of the overall cost.

Ryanair charges £5 per person, per flight, even if all the passengers are paid for on the one card, in a single transaction.

Vic, from Hertfordshire, contacted Radio 4's Money Box to complain after Ryanair charged him £20 to pay by credit card.

He was buying return flights to Italy for himself and his wife:

"I paid £5 per person, per leg of the journey. I think they're coining it in."

Cheap flights

The UK Cards Association estimates for credit cards, banks charge airlines between 1.5% to 2.5% of a payment in transaction fees.

It believes it is significantly less than £1 to process a debit card transaction.

What's really important to passengers is that they get the lowest fare
Stephen McNamara, Ryanair

That means a family of four on a return journey paying on one debit card should pay about 30p, if they were just covering the airline's costs, but would be charged £40 by Ryanair.

Stephen McNamara, chief spokesman for Ryanair, said the priority for customers was to get the cheapest flight.

"Irrespective of whether we make a profit or not, what's really important to passengers is that they get the lowest fare."

Ryanair said if Vic had paid with a Visa Electron card, he would not have paid any transaction fee.

It said about 30% of its customers pay this way, but the UK Cards Association estimates only about 8% of UK consumers have the Visa Electron card.

Phased out

It is likely to become more difficult to obtain in the future.

Visa Europe said it would be phased out as its unique features were now available on normal bank debit cards.

Abbey - which along with HBOS is one of the few banks which still offer it - said it will not be issued to new customers from 14 December.

And Travelex will not be offering Visa Electron on its pre-payment card from next year.

Advertising rules

Industry insiders believe having one free payment method allows airlines to advertise cheap rates without having to include charges most customers pay.

Rochelle Turner head of research at Which? Holiday said offering the Visa Electron payment option was important for airlines and their marketing:

"My understanding is that if they didn't have this one free vehicle offer, then they would have to reduce their rates."

Advertising Standards Authority rules say where an advert shows a price it should include all non-optional charges.

The Office of Fair Trading says, if the charges are unavoidable and foreseeable, they should be included in the headline price.


BBC Radio 4's Money Box is broadcast on Saturdays at 1200 GMT, and repeated on Sundays at 2100 GMT. Download the podcast.



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SEE ALSO
Ryanair may halt 'rapid growth'
02 Nov 09 |  Business
Call for airline charges clean-up
17 Jul 09 |  Business

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