Trying To Nab Cheap Flights? Read This First

What the RBA's excessive surcharge rule means for you and your travel plans.

31/08/2016 12:51 PM AEST | Updated 31/08/2016 3:50 PM AEST
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On September 1, the Reserve Bank of Australia's final standard on excessive surcharges will come into effect, meaning the way large Australian retailers are allowed to charge card payments is about to change.

Sounds pretty boring, right?

Except it actually comes down to money -- your money -- and how much of it retailers are allowed to take when you select a specific payment option. So you know when you spend ages researching the cheapest flights from Sydney to Melbourne, only to get to the payment form and be whacked with a fee for using your credit card? This is what we're talking about, and it's all about to change, especially when it comes to travel.

In a nutshell

The new Competition and Consumer Amendment (Payment Surcharges) Act 2016 comes into effect on Thursday, 1 September, 2016, and will be regulated by the ACCC.

It's designed to reduce excessive surcharges and, at the moment, applies to large retailers (smaller retailers will go through the same thing this time next year).

What does it mean?

Firstly, this doesn't mean surcharges are no more. Merchants are still allowed to surcharge, but how much they are allowed to surcharge on particular payment cards has changed.

As outlined on the RBA website, "the new standard will ensure that consumers using payment cards from designated systems (eftpos, the debit and credit systems of MasterCard and Visa, and the American Express companion card system) cannot be surcharged in excess of a merchant's cost of acceptance for that card system."

In other words, depending on which card you choose to pay on, while you still may face some kind of surcharge, big businesses aren't allowed to charge you excessively.

Where this gets particularly juicy is when it comes to booking flights, as "merchants will not be able to impose high fixed-amount surcharges on low-value transactions, as has been typical for airlines."

Michele Piacquadio
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Booking flights: then and now

"So traditionally what has been happening with airlines is the domestic surcharge has been around $7, plus GST," Tim Murphy, Managing Director of Media Travel told The Huffington Post Australia.

"For an international ticket it's $30. That's kind of been the benchmark.

"What they are going to do now is change that, so the surcharge will be based on a percentage of the actual airfare you're purchasing. Which means for domestic flights, you are going to be paying a lot less than $7.

"For international flights, it's going to be based on a percentage of the international airfare. So it really depends on what ticket you buy."

If I was looking at buying an international ticket, I would probably want to do it today as by tomorrow you would be worse off.

"A business class ticket could be $9000," Murphy continued. "I wouldn't want to be paying a percentage on that. You could easily be paying $200-$300 in surcharges, though luckily [the allowable surcharge amount] has been capped at $70."

It's worth pointing out you can already avoid paying surcharges at all when booking flights online, simply by opting for the PayPal or direct debit option. However, it's not every day we have the money just sitting around in our actual accounts, right? And, let's be real, you're even less likely to have that cash lying around if you're the sort of person who has been trawling the internet for hours looking at ways to save every single cent.

"Essentially for people who buy low cost seats on carriers, there will be an immediate saving," consumer advocate and Surcharge Free spokesman Christopher Zinn told HuffPost Australia. "That's a plus. But for those with more expensive seats, they may pay more, though there will be a cap on that."

When to book

In short: if you're a cheapskate, wait until after September 1.

If you're planning a fancy-pants holiday, you might want to lock down those flights today.

"If I was looking at buying an international ticket, I would probably want to do it today as by tomorrow you would be worse off," Murphy said.

"If you're looking at a cheap domestic fare, I would hold off until tomorrow."

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