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How credit cards rank against cash when buying travel

March 2, 2016 Business News, Headline News No Comments Email Email

egtmedia59Only about one in three of Flight Centre’s leisure transactions is conducted using a credit card – a proportion that other agents say applies to them as well.

The proportion was disclosed by Flight Centre managing director Graham Turner, discussing new laws designed to crack down on excessive credit card surcharges.

Sky News reported Turner saying Flight Centre might raise service fees “a bit” to recoup any small loss of margin caused by the new laws.

The Australian Consumer and Competition Commission (ACCC) will be responsible for policing the new law, under which merchants can be fined up to AUD 108,000 if caught overcharging customers paying by credit card. The Reserve Bank of Australia (RBA) will set the guidelines for what constitutes appropriate fees.

Turner is keen to see details because he says “we, obviously, have a risk with chargeback and that has been acknowledged by the RBA”.

Turner’s disclosure that credit cards are used for just one third of Flight Centre’s leisure transactions raises the question of how widely credit cards more generally, when consumers buy leisure travel. Now that the Travel Compensation Fund (TCF) no longer appoies, credit cards can offer some measure of consumer protection.

A quick survey of travel agents indicates that credit card transactions represent about 30% to 34% of customer payments; a proportion in line with Turner’s estimate. One  reason for a reluctance to use cards is that most, if not all, companies charge a credit card fee of between 1% and 3%.

In a high-value holiday, that can work out to be a significant amount. A recent court case involving a defaulting travel agent mentioned that one couple had lost the AUD 33,000 they had paid for a European Holiday. See: Heartbreak travel agent ripped off clients and friends

While it’s not known what method of payment was used in that case, a holiday costing AUD 33,000 could involve AUD 660 in credit card fees.

That’s enough to make many people opt for cash – though that choice entails the risk, in this post-TCF era, of losing the lot.

Written by Peter Needham

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