Budget airlines forced to include payment fee in ticket price
Twelve budget airlines, including Ryanair and EasyJet, are being forced by the Office of Fair Trading (OFT) to include their payment charges in their ticket prices.
Aer Lingus, BMI Baby, Eastern Airways, easyJet, Flybe, German Wings, Jet2, Lufthansa, Ryanair, Thomas Cook, Thomson TUI and Wizz Air will all have to include the cost of paying by debit card in the headline price of their tickets by December this year.
They will also have to explain any extra charges for paying by credit card at the beginning of the transaction rather than springing them on customers at the end.
The changes are being forced through by the OFT following a consumer law investigation.
"This is a great outcome for the millions of people who buy flights online. It is important that the cost presented when they search for a flight is realistic and they are not surprised by extra charges. Otherwise it is harder for them to shop around for the best deal," says Clive Maxwell, the OFT's chief executive.
"Because of our enforcement action, most airlines have already made their headline prices and other payment charges easier to understand by changing their systems and processes. The rest will complete changes in the coming months.
"We made it clear from the start that we would use all of our enforcement powers, including court action if necessary, but are pleased to have reached agreement with the airlines before court proceedings were required."
Ryanair has stated that its £6 flight administrative fee will be included in advertised fares by 1 August, and will be included in the website headline prices by 1 December.
Ryanair passengers who pay with one of the firm's cash passports, which had previously been immune from charges, will now receive a discount on their fares instead.
Easyjet has already started including its £9 booking charge in its advertised prices.
Eastern Airways, Flybe, German Wings, Lufthansa, Thomas Cook, Thomson (TUI), and Wizz Air have all also brought the charges into their upfront pricing structures.
"It is good news that there will be better transparency over card charges and consumers won't have to endure hidden extras which bump up the advertised price. Nothing is more frustrating for consumers than seeing a good online deal disappear on the final screen before booking," says Sarah Brooks, director of financial services at Consumer Focus.
"This news is long overdue and it should get even better for consumers by the end of the year when it is expected that the Government will ban excessive fees levied when people pay by credit or debit card."
Are you a regular user of budget airlines? Vote in our poll
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
Where APR is the rate charged for money borrowed, Annual equivalent rate is how interest is calculated on money saved. The AER takes into account the frequency the product pays interest and how that interest compounds. So, if two savings products pay the same rate of interest but one pays interest more frequently, that account compounds the interest more frequently and will have a higher AER.