Paying with a credit card will soon cost you more as some companies plan to add a surcharge

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Businesses will be allowed by credit card companies to add surcharges to their bills for customers who pay by credit card, under new rules that come into effect this week.alice-photo/istockphoto.com

According to a new survey from the Canadian Federation of Independent Business, an estimated one in five small businesses plan to pass credit card transaction fees on to their customers after new surcharge rules come into force this week.

From Thursday, businesses will be allowed by credit card companies to add surcharges to their bills for customers who pay by credit card. The charge is not fixed, but would be around 1.4% or more of the bill. Financial institutions use the money largely to fund loyalty programs.

The new rules are the result of a settlement in a long-running class-action legal battle between small merchants, Visa, MasterCard and financial institutions. Credit card companies have long resisted the idea of ​​allowing companies to pass on these costs because it could lead consumers to switch payment methods to avoid paying the fees. Instead, the cost is borne by merchants, many of whom feel they have to pay the fees to meet the needs of the many customers who want to pay by credit card.

CFIB President Dan Kelly said he’s glad business owners now have the choice to make these fees transparent to their customers.

“Merchants have always had to pass on these fees to stay profitable; they just buried them in the cost of goods,” he said.

According to CFIB’s online survey of 3,914 members, conducted September 1-8, 19% of respondents planned to add the supplements as soon as they could. 26% said they would if their competitors did, 40% said they weren’t sure yet, and 15% said they wouldn’t.

Those in consumer-facing businesses were the least likely to say they would pass on the costs. Only 12% of retailers, 17% of personal services and 19% of hospitality businesses said they were sure to add the surcharge.

On the other hand, firms that often sold to other firms were more likely to want to pass on transaction costs. These sectors include: transportation (37%); finance, insurance and real estate (32 percent); and construction (31%).

Of those who didn’t want to pass on the fee, 79% said it was because they thought it would alienate their customers.

Karl Littler, senior vice-president of public affairs for the Retail Council of Canada, said his group recently held an information session for members big and small, and while the issue is generating interest, he said he believed retailers would remain reluctant to start overcharging.

“I think it’s going to land with a thump in the retail space,” he said.

Yet credit card fees have led to disputes between card companies and retailers. In 2016, Wal-Mart Canada stopped accepting Visa cards in stores in Thunder Bay and Manitoba for several months. The two sides reached a fee agreement in early 2017, and Wal-Mart resumed accepting Visa.

The federal government promised in its 2021 budget to pressure card companies and financial institutions to reduce fees from their current average of 1.4%, but has yet to follow through. commitment.

Credit card transaction fees have become a growing concern for businesses as customers increasingly use cards instead of cash. According to Payments Canada, six billion transactions were made with personal credit cards in 2021, compared to 4.5 billion in 2016. The total value of these transactions increased from $408 billion to $509 billion.

Although this legal settlement was led by small businesses, large companies have also complained about credit card transaction fees.

Telus Corp. wrote to its industry regulator, the Canadian Radio-television and Telecommunications Commission, in August, asking for permission to charge customers a 1.5% transaction fee if they pay their bill with a credit card . Telus told The Canadian Press it expects charges to average $2 a month.

Mr Kelly said the involvement of big companies like Telus showed how much power the credit card companies had over all businesses. “It shows how big the imbalance in the market is,” he said.

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