Canadian Businesses Can Charge Fees on Credit Card Payments

As of today, Canadian businesses are allowed to charge credit card fees on purchases.

For consumers and businesses, this change is bound to send shockwaves through our spending habits, not to mention the credit card rewards space.

Let’s explore the ramifications of this dramatic news.

Canadian Businesses Can Charge Credit Card Fees

Starting today, Canadian businesses can levy a surcharge for accepting credit card payments. This fee would then be paid by customers who choose to use a credit card to make their purchase.

For the past 30 years, this wasn’t allowed. There’s actually no Canadian federal legislation preventing this; instead, it was a rule put in place by Visa and Mastercard as part of the merchant agreement that they have with businesses who decide to accept credit cards.

This policy has been beneficial for credit card companies, as it incentivizes consumers to use their cards on a level playing field with cash prices for goods and services. As a result, credit card companies make money from businesses, and businesses make money from increased sales as customers enjoy the convenience of cashless payments.

This change is part of the settlement of a class-action lawsuit brought by businesses against Visa and Mastercard, alleging that the costs imposed on merchants to accept credit cards have been punitively high.

Going forward, Mastercard has modified their merchant agreement to allow businesses to levy a surcharge on customers up to 2.4% or the credit card processing fee, whichever is lower. Consumers using debit and prepaid Mastercards are still protected from having a surcharge imposed.

Visa has yet to confirm their exact policies, but I’d guess that they’ll align closely with Mastercard. American Express is not part of the decision in the class-action settlement, and they tend to do things a bit differently anyway, so it’ll be interesting to see how they respond.

Meanwhile, the Canadian government has also been exploring legislation that would reduce interchange fees. No action has been taken yet, and discussions have been stagnant through the pandemic.

How Do Credit Card Payments Work?

Consumer credit is issued by accredited lenders, including American Express, BMO, CIBC, RBC, Scotiabank, and TD. With the exception of prepaid cards, you have to apply to get a credit card,…