Credit Card fees charged to retailers in Canada are among the highest in the world.

by: Andrew Klukas

These charges are in no way a reflection of the true costs of electronic transactions, as Interac proves this by only charging a few cents per transaction while credit cards force us to pay a hefty percentage of up to four per cent of each transaction – the second highest rates in the world following the US. According to the Competition Bureau, Canada's credit card issuers have set up a perverse system that thwarts the normal rules of the marketplace and costs consumers billions of dollars annually.

This abusive, rent-seeking behaviour on the part of the credit card companies is a consequence of Visa and MasterCard’s market dominance, as they occupy up to 90 per cent of the credit card volume in Canada. It represents a market failure that must be addressed by government through legislation for the economic and social good of Canadians as a whole, not merely our members.

Australia and Europe have passed regulations to cap these fees at 0.3 per cent and 0.3 per cent respectively. In 2010, Ottawa grudgingly announced a "generous" discount rate to 1.5 per cent on average, a rate three to five times higher than the countries mentioned. A year later, some retailers have noticed a very slight decrease in their rates. However, MasterCard has acknowledged that it has not yet met their 1.5 per cent average rate and this should cause government great concern.

It appears the credit card companies are using the average as a means to increase rates to some retail sectors as a means to cover a much lower rate they agreed to with a few individual large retailers. To illustrate, Visa itself recently ran full-page ads in media across the country last year, pointing out that it could not give in to Walmart’s demands for fees lower than local grocery stores, convenience stores and other small businesses, because that would mean Walmart was “using their size and scale to give themselves an unfair advantage.” This is now exactly what has happened.

The inability to leverage preferential interchange rates such as those negotiated by American corporate giants Costco and Walmart puts smaller retailers at a decided disadvantage. When both MasterCard and Visa report to Ottawa on their self-audits on their voluntary reduction targets, the unknown special rates for U.S. giants Walmart and Costco are simply mixed into those results to produce a lower overall average. That means the results themselves are not only disingenuous, but that small business is indeed supporting the larger retailers.

The over 7,000 convenience, retail petroleum and carwash sites across Western Canada work very hard every day, generating thin profit margins every year. We would much prefer that these largely family-run stores could invest the bulk of those lost $36,000 in wages, job creation, new equipment or lower prices for customers than to see them absorbed by ravenous credit card companies. Canadian retailers, particularly smaller businesses, need one regulated rate – a rate that is fair and transparent – similar to what we find in Australia and the EU.

Efforts to address high credit card fees on merchants got a boost last September when the Federal Finance Minister announced a review of those fees. The goal of the review is to ensure that there is, in fact, adequate competition and transparency for Canadian businesses and consumers when it comes to the fees they incur when using credit cards.

The Minister’s announcement resulted in the suspension of a private Members Bill tabled by federal MP Linda LaPointe (Lib) giving the Minister of Finance the authority to set credit card fees. Madamme LaPointe has consulted extensively with representatives from the Small Business Matters Coalition – a group of associations representing 98,000 Canadian small businesses. The coalition includes the Canadian Convenience Stores Association, which represents the c-store owners on matters involving federal legislation. Depending on the result of the Minister’s review, Madamme LaPointe may be encouraged to reintroduce the bill.


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According to a study by the Canadian Convenience Stores Association, these fees represent an average cost of $36,000 annually to Canada’s convenience store owners (totaling more than $825 million annually for the industry). This is equivalent to the average profit earned at each site through hard work.


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