Canadian Businesses Plead for Lower Card Fees

Canadian business associations are calling on the government for commitments to lower credit card fees, saying it would save small businesses millions of dollars annually and could also benefit customers.

Transaction fees for credit cards—also called interchange or processing fees—are what a business must pay in order to accept credit cards. They are charged for every purchase made, whether online or face-to-face, and go straight to whichever bank or company issued the card. Debit cards also have such fees, but the cost is significantly lower than those associated with credit cards.

It’s not just the businesses directly affected by the charges that should be concerned by them, because those added costs will inevitably mean higher prices for customers, explains Gary Sands, Senior Vice-President of the Canadian Federation of Independent Grocers.

As the Canadian Federation of Independent Business has previously noted, one simple way consumers can support small business is to pay cash.

Tom Gilchrist from Gilchrist Vending in Toronto, whose job it is to equip business premises with ATMs, and who supplies many small and medium shops, restaurants and cafés across Ontario, notes small businesses are ‘just now realising the costs associated with cards are much higher than with cash,’ thanks to transaction fees and ‘hidden bonus schemes on the cards, which often add further costs.’

In 2020, consumer credit card transaction fees in Canada were lowered from 1.5 percent of a transaction to 1.4 percent after a five-year deal was brokered between the government and credit card companies. The federal Finance Department estimated this modest reduction would save small and medium-sized businesses $250 million annually.

Unfortunately, as the pandemic has driven more purchases online and seen higher card use, businesses are paying relatively more, even with the lower percentage. Karl Littler, Senior Vice-President of Public Affairs for the Retail Council of Canada, explains: “Because of all that growth in volume… most merchants will still be paying significantly more in fees.”

Another facet of transaction fees is that they’re often higher for smaller businesses than larger ones, in terms of percentages. A small shop that pays fees for multiple transactions of low amounts will end up paying more than a large shop in which people are spending more per transaction.

With many businesses being forced online in 2020, transaction fees were higher still because more is charged for online and over-the-phone uses of cards, which carry a higher security risk than in-person transactions.

While the reduction to 1.4 percent is welcome, small and medium-sized businesses argue it is not nearly enough. The Small Business Matters Coalition, chaired by Gary Sands, points out that big businesses are able to negotiate better rates, meaning smaller ones end up paying more on every front. The Coalition is ultimately calling for a one percent cap on fees for all retailers, and for smaller businesses to be given the same rates as big businesses.