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By law, airlines must provide at least one free method of payment, otherwise booking fees must be added to the base ticket price. This inflates the apparent price of the ticket and makes customers less likely to make a purchase. In reality, there is a battle between keeping one free method of payment available and ensuring that as few people as possible use it.
Most budget airlines in the UK have a policy of charging for payments made with most Visa and Mastercards, but not for Visa Electron cards. Visa Electron cards are rarely used, fewer than 1.7 million people in the UK have them – most of which are teenagers. It makes sense for airlines to choose Visa Electron cards as the one payment method that does not incur payment charges.
This means that these 1.7 million people can get their airfares for less than everyone else. However, as teenagers do not make up a large proportion of the individuals booking airline tickets, it actually means that airlines can overcharge a large amount of people.
The case of Ryanair has drawn new attention to this phenomena. In Ireland, no banks which issue Visa Electron cards so effectively it was nearly impossible for Irish citizens to book Ryanair tickets without fees. It seems though that Ryanair is a little more worried about the situation in the UK. Several money saving internet groups have been sharing information, for some time now, about how to obtain a Visa Electron card for free.
Consider the possible savings for a moment. Since Ryanair charges €5 per passenger per segment, a family of 4 booking a return flight will be subject to €40 in credit card fees. For regular passengers, having a visa electron card could save hundreds of Euros per year.
The airlines claims that by introducing free-payment by way of pre-paid mastercard, passengers from all European countries have a chance of receiving free flights. Some countries such as Belgium, Ireland, Netherlands and Portugal do not currently offer Visa Electron cards.
The main issue with pre-paid mastercards is that they cost money to use. It seems less likely that passengers will bother to go down the prepaid mastercard route when the saving is not as significant. Ryanair will therefore make more money on regular credit card fees.
Is this another sinister trick by Ryanair to steal all our money? Not likely. While newspapers are already spinning this angle, the reality is that credit card charges were not really “optional” for passengers living in countries without Visa Electron cards.
UK advertising regulations state that one method of payment must be free of charges for the charges to be defined as “optional”. However, with Visa Electron, this is technically not the case across Europe. This could lead to potential controversy in terms of what can and can’t be defined as “optional” charges.
The worrying thing for Visa Electron cardholders is that other airlines, such as EasyJet and BMI Baby may follow suit. For now, Ryanair has offered a one month grace period where Visa Electron cardholder can still book tickets without charges.
Mark is the lead author for Never Fly Economy. A frequent flyer for the last ten years, Mark recommends reading Frequent Flyer Master to earn free miles today.
