Businesses can Now Pass on ‘Swipe Fees’ to Consumers

Businesses across Canada can now pass credit card fees on to consumers, with the exception of Quebec.

Regulations giving retailers the green light to do so are prohibited by that province’s Consumer Protection Act.

The new rule is the product of a multi-million-dollar class action settlement involving Visa and Mastercard that allows businesses to add a surcharge on some credit card transactions to offset processing fees.

Nearly one in five small businesses are considering it, according to a new survey by the Canadian Federation of Independent Business (CFIB). A further 26 per cent said they will do so if their competitors or suppliers are onboard.

“Most smaller merchants are still on the fence or don’t plan to surcharge as they don’t want to risk losing customers; however, it’s important for them to know they have this option,” says Corinne Pohlmann, senior vice-president of national affairs at CFIB. “Small businesses have long been dealing with expensive credit card processing fees and trying to find ways to absorb the cost of accepting premium cards without the ability to surcharge or refuse those cards. Surcharging gives them the ability to offset some of their costs and be transparent with their customers about the fees they pay.”

The survey revealed more than one-third of small businesses are not sure if they will surcharge, while 15 per cent don’t intend to.

Businesses that often sell to other businesses like construction, manufacturing and finance/insurance reported they were most likely to report surcharge for credit card usage, while those that serve consumers were less likely.

“These data reveal the frustration so many business owners feel about the high cost of credit card processing, which can eat about 1.5 to 2.5 per cent of every sale,” says CFIB president Dan Kelly. “The power to surcharge will allow merchants to address their rising operating costs, push back against future credit card fee hikes and keep their prices competitive. With mounting pressures small businesses are facing due to inflation and government-imposed costs, surcharging is another way to reduce their cost burden.”

Businesses must apply to surcharge by registering their plans with their credit card processor and Mastercard. (Visa requires registration with the processor only.) Once they have registered their intent, businesses must then wait 30 days before they can start to apply a surcharge on credit card transactions.

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