Credit card surcharges are becoming more common. Here's how to avoid them.
I've just spent a total of £27.84 on absolutely nothing. Well, not exactly nothing - it was on "credit card surcharges". It's right there on my bill: £30 for the pleasure of using my credit card.
It all started when I booked myself a holiday in Las Vegas using my credit card. Unfortunately, my current account was pretty empty so my credit card was my only option till I got paid. Plus paying by credit card offers you Section 75 protection (in the form of compensation) should your holiday firm or airline go bust.
Credit card surcharges
The tour itself, plus a hotel room the night before, cost £975. However on top of this was a 2% credit card surcharge which added £19.50 to the cost of my holiday - enough for a meal out or a few rounds of Blackjack in Vegas.
I had to book the flights separately and after surfing cheap flight sites for a couple of hours I finally decided on return trip with Virgin at £641.50. On top of this was a credit card fee of £8.34, 1.3% of the cost of the flight, and around the same as the train fare from my flat the airport.
So, in total I'd paid £27.84 in credit card surcharges to book the two components of my trip on my credit card. But what do these charges actually cover and why are they so expensive?
According to retailers, credit card surcharges cover the cost of processing credit card payments, so-called merchant service fees.
How can I avoid credit card surcharges?
The obvious way to avoid credit card surcharges is not to use a credit card. Debit cards are rarely subject to such charges and if they are, they're usually less.
The exception to this rule is - unsurprisingly - Ryanair which recently hiked its debit card surcharge to £5 per person per flight to match the surcharge it levies on credit card customers. This can add a staggering £40 onto the price of flights for a family of four looking for a cheap break.
Other firms that charge for debit card usage tend to charge around 40p or 50p per transaction which is in line with the amount charged to them by the bank.
One way to avoid credit and debit card surcharges altogether is to get a Visa Electron card. Although Electron cards have traditionally been the poor relation of debit cards, they come into their own when it comes to booking via Ryanair as they don't attract a fee.
Only a small handful of UK banks - Halifax, Bank of Scotland, the Co-operative Bank and Abbey - issue Visa Electron cards and they're generally included with basic bank accounts rather than more heavily marketed mainstream current accounts. Electron cards are less flexible than other debit cards and you can only use them if you have enough money in your account.
If you don't fancy the hassle of opening a bank account just to get your hands on a Visa Electron card, however, you could take out Travelex Cash Passport card instead and load it up with sterling. All you need is photo ID to be eligible for the card, and you can get it from any Travelex branch, as well as Thomas Cook, Sainsbury's and Tesco.
Seems to me it's a nifty piece of plastic well worth having!
The solution
So, what should I have done? Well since booking my holiday I've given this a lot of thought and done a little research. The answer seems to be that I should have paid £100 deposit for my holiday on my credit card - and thus benefitted from the consumer protection offered by credit cards - and then raided my savings account to pay the balance on my debit card. This would reduce the £19.50 surcharge I paid on my tour to just £2.
The flights had to be paid in full on booking, however. So really, my only option here was to forgo the protection of a credit card and use a Visa Electron card instead. Personally, I'd rather not take the risk that the airline or holiday firm will go bust and leave me stranded for the sake of £8.34.
What do you think? Have you found a better way to avoid these rip-off charges? Share your thoughts using the comment boxes below!
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