December 6, 2023

Business Visa

The Business Visa Is Mightier Than Sword

Credit card fees a ‘cost of doing business’

Businesses in Canada have long been on the hook for paying the fees associated when a consumer pulls out a credit card to pay for a purchase.

That changed in October, when a new policy was brought forward by credit card companies which allows businesses to pass the cost of the fees on to the consumer.

Credit card companies allowed for the change after a class-action lawsuit brought forward by businesses and banks against the companies for their high fees of use.

Under the new policy, businesses can charge a fee of up to 2.4 per cent when a customer pulls out the plastic to pay for a purchase. The change is something not sitting well with all local businesses.

“I think penalizing customers for choosing one method over another could leave consumers with a negative feeling during the buying process, and that’s one of the last things I want anyone in my shop to feel as they leave,” said Shannon Thibault, of Stettler’s Dirt Road Pretty clothing store.

“Every sale matters to me and my business, and implementing fees or penalties on the customer could influence them to shop elsewhere, so I will definitely not be charging my customers should they choose to use their credit card as a form of payment.”

Until this point, businesses accepting credit cards were responsible for paying for the fee, which could be up to 3 per cent depending on the credit card used.

Some businesses in the past have raised prices or charged an additional convenience fee to handle credit card fees, however, this is the first time businesses have been officially allowed to pass the fee on to the consumer.

Up to this point, there has been specific wording in business agreements with credit card companies which prevented them from directly passing on the cost.

Those businesses wishing to do so will need to do extra book keeping though, and have a discussion with the appropriate card companies, 30 days in advance, before they start collecting the fees.

Additionally, businesses choosing to implement the fee are suggested to have it posted at the entry to the business and at the location of payment; though it would still be prudent to ask about the charge when paying.

“I think some companies will put this in,” said Castor’s Rod Anderson.

“I don’t think we will.”

Anderson is the owner of Castor’s Family Foods, and he noted that he would be “disappointed” as a customer if he had to pay an additional fee just for choosing credit cards as a method of payment.

While he, as a business owner, agrees that the the credit card fees are high, there is also the convenience factor to think about.

Anderson noted that thanks to the credit companies, when someone swipes, like debit, the money appears in his business account automatically. Unlike days past, there is no longer a need to wait 10-days for a cheque to clear the bank.

“I wouldn’t like (the charge) as a consumer,” said Anderson.

“People are cutting back. Everything keeps going up and up and up.”

Anderson isn’t wrong. According to the Statistics Canada website, inflation for the month of October had dipped but was still sitting at 6.9 per cent on a year over year average, driving costs of everything up.

As for the credit card fees, Anderson and Thibault both see the fees as just the cost of doing business.

“Credit card and transaction fees are naturally an expense retailers are going to incur,” said Thibault.

Another business which replied to the request for comment is Lawlor Jewelry, who agreed with Thibault and Anderson.

While Lawlor can see places like convenience stores bringing in a fee for smaller transactions, under $5 to $10, in general he feels that most businesses won’t “tack on” an additional charge.

Speaking only on behalf of Lawlor’s, Lawlor noted that the business is part of the Canadian Jewellers Association, Canadian Jewellers Group, the Canadiand Federation of Independent Business (CFIB) and the Stettler Regional Board of Trade (SBOT), all of which work with the businesses in reviewing credit card and debit card rates on at least a biannual basis as part of their membership.

Lawlor says that all Stettler businesses are automatically part of SBOT, and any business can join the CFIB.

According to Lawlor, where some organizations steer away from membership in these larger organizations as a way of avoiding fees and and saving budgets, the memberships are often worth it the savings and discounts they can receive, due to the bulk-buying, starting with the reduced rate on credit card fees. Other perks include reduced postage and shipping fees, according to Lawlor.

Several other businesses in both Stettler and Castor were contacted for comment, but none replied by deadline.

The new policy only affects Visa and MasterCard, the two cards involved in the lawsuit. Debit remains unaffected and it is unknown as of deadline what the effect will be for users of credit cards like American Express.

– With files from the
Canadian Press

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