Travel: Credit card, frequent flier changes portend problems
By Ed Perkins, Tribune Media Services, Posted: 10/04/2012
You'll soon be facing two new reverses in your ongoing
struggles with travel suppliers. Although the preliminary indications are
relatively obscure, they presage possible big new developments in the next few
years. You need to start planning now.
Paying with plastic
Allegiant Air has quietly initiated a new way of treating
plastic. Its all-up fare displays now feature a "debit card" price;
if you want to use a credit card, you pay an extra $4 per flight regardless of
the base price. The fine print still lists a higher base fare, then subtracts a
$4 "debit card discount," but the net effect is the same: You pay $4
more to buy with a credit card than with a debit card.
What's going on here? Airlines would like to avoid the fees
that credit card issuers charge. For Internet purchases like airline tickets,
industry reports say those fees are roughly 2 percent of the transaction cost.
Debit card fees are lower, about half that figure. Even a 1 percent difference
represents lots of dollars on the multibillion dollars in airline revenues.
The reason for Allegiant's use of a "debit card
discount" rather than "credit card surcharge" stems from a bit
of Orwellian logic: Contracts between the card systems and merchants specify
that merchants can't add credit card surcharges to nominal list prices, but
they are allowed to give "cash" or "debit card" discounts.
So far, none of the other "usual suspects"
airlines has introduced such pricing. But, as I've often noted, nothing catches
on in the airline business as fast as a bad idea.
As consumers, you have a big stake in the outcome to this
battle. Credit cards provide some important benefits that debit cards do not:
-Legal protections, such as charge-back laws, apply to
credit cards but not to debit cards.
-Debit cards typically do not provide such ancillary credit
card benefits as rental-car collision protection, other types of
"insurance," and warranty guarantees.
-Debit cards typically do not award miles, points or cash
discounts.
-Credit cards allow you to repay a purchase over extended
time periods, while debit cards deduct a charge from your bank account
immediately.
As this battle develops, I expect to see some blurring of
the distinctions and the addition of some benefits to debit cards. In addition,
independent payment systems such as PayPal will likely play a much bigger role.
For now, however, you just need to keep watching developments -- and to decide
on any given transaction whether to pay more for a credit card buy than with a
debit card.
Frequent-flier devaluation
Delta Air Lines has reduced the miles it awards for travel
on "unpublished" fares, including student, consolidator, group and
similar fares. Mileage earning will run from the standard 100 percent to as low
as 25 percent, depending on the fare class.
Unpublished fares in the Asia Pacific region are exempted
due to some contract fine print.
I suspect this is the first of many such devaluations. When
American started the first frequent-flier program, the spread between the
highest and lowest fares was much less than it is now, so earnings based on
miles flown made some sense.
Now, however, my belief is that most airlines would prefer
to base earnings on amount paid or the equivalent, rather than miles flown.
Foreign lines and some smaller U.S. lines, which established
programs much later, adopted this system. I think the giant U.S. airlines will
try to follow as quickly as the public relations impact will allow.
The clear conclusion: Miles and mileage programs don't
improve with age.
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