Sunday, August 16, 2009

Should motels add service fees to credit cards?

We were interested to see that Visa has settled out of court with the Commerce Commission that alleged the credit card company had been price fixing the fee paid by merchants on transactions.

Visa has a agreed to pay $2.6 million towards the Commerce Commission's costs in taking action and allow banks to individually set the fee charged to merchants.

From April 17 next year, Visa has also agreed to allow merchants to add the transaction fee to the cost of a purchase. This is an important concession. Effectively this action will open the floodgates for merchants to add transaction fees for all credit card purchases.

Under current merchant agreements, retailers are not allowed to recover merchant service fees from cardholders, although unofficially, many flout this restriction by offering a cheaper price for non-credit-card purchases.

In theory, the cost of merchant service fees are currently built in the the price of all goods and services so therefore all consumers are paying the cost of credit card use regardless of the payment method they choose. Once retailers are able to charge consumers for using a credit card, they will be able to identify and recover costs directly from cardholders. Differential pricing of the "cash" price and the credit price could also be more openly advertised.

Hey, we live on a user-pays society so shouldn't those using a service expect to pay its full cost? Cue Tui add - yeah right!

So, to answer the title of this post: "Should motels add service fees for credit cards?" We say NO!

Theory is all very well, however we believe that the temptation of charging merchant service fees should be resisted by the accommodation industry. Such additional charges are tacky, serve only to confuse and frankly p*ss the consumer off.

In our opinion, the accommodation offer should be priced unambiguously with an all-inclusive tariff.

Any industry debate about the need to recover costs by adding any additional fees should be quickly rebuffed by our industry leaders and directed into a debate about the economic need to increase existing tariff.

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