Canadian Businesses Now Able to Pass Card Fees on to Customers

Canadian businesses are now permitted to add a surcharge to the bills of customers paying with a credit card. The change came as part of the settlement of a class action lawsuit claiming Visa, Mastercard and a number of banks had conspired to set high interchange fees while preventing merchants from refusing to accept higher-cost credit cards.

Alongside rebates on fees merchants paid amounting to $188 million CAD, Visa and Mastercard modified their no-surcharge rules—which had prevented merchants passing costs on to customers—to allow them to add a surcharge up to a cap of 2.4 percent, and committed to keeping this change in effect for at least five years.

In other parts of the world—including Australia, China, Israel, Malaysia and the EU—card interchange fees are capped at well under one percent. CBC reported that Visa has given the average fee for its cards in Canada is 1.4 percent.

Beginning in October, merchants must give card providers 30 days’ notice should they intend to begin charging a fee. They will also be required to make it clear to customers at the time of payment that a surcharge will be included, and that it will not be more than they are charged for providing the card payment option. The rules will not come into force in Quebec, where the surcharges are forbidden under the province’s Consumer Protection Act.

Telecom provider Telus has already notified customers of a 1.5 percent credit card surcharge that will be added to bills. CBC reports that a poll of around 4,000 members of the Canadian Federation of Independent Businesses (CFIB) conducted in early September found that one in five small businesses will add the fee, and over 25 percent plan to add it should their competitors do so. The same amount are also planning price increases to cover the cost of card payments.

More than 33 percent of CFIB members also said they will try and convince customers to pay using other methods, which follows on from a December 2020 plea for people to consider paying cash when transacting with small businesses.