Small businesses applaud credit card fee relief, but consumer savings not guaranteed
Ottawa announced it has reached deals with Visa and Mastercard to lower such fees by up to 27 per cent from their current average rates for more than 90 per cent of credit card-accepting businesses.
Small business owners are praising a measure in the federal budget to lower credit card interchange fees, but some industry representatives argued the move will do little to save costs for consumers.
Ottawa announced it has reached deals with Visa and Mastercard to lower such fees by up to 27 per cent from their current average rates for more than 90 per cent of credit card-accepting businesses.
The government estimated this would save businesses $1 billion over five years.
Canadian Federation of Independent Business president Dan Kelly called it the “biggest win” of the federal budget.
“Credit-card usage has just ballooned over the last number of years and therefore the business is just on the hook for a much larger chunk of sales,” said Kelly.
“With margins being constrained for small businesses, costs going up on almost every line of their budget, some relief on this one would be hugely beneficial.”
Rich Gowman, owner and operator of Amplifiers Plus in Kitchener, Ont. which repairs guitar and bass amplifiers, said he has been adding a surcharge for credit card transactions since the start of the year to cover the interchange fee costs to his business.
He said his company was dinged an extra three to five per cent per credit card transaction depending on the card used.
“It wasn’t really hurting me that much, however it was still a fee that I had to absorb and I had to write off as a business expense,” he said.
“If those fees are reduced, then I’ll be able to reduce the surcharge that I’m charging on the credit card.”
But Kelly said details are still lacking about which small businesses will qualify and when. He said it’s also unclear how much each business might save.
“We’re optimistic that this will be a good deal, but there’s a lot of ground left to cover and so we’re hoping for some follow-up announcements,” he said.
Those concerns were echoed by Gary Sands, senior vice-president of public policy with the Canadian Federation of Independent Grocers, who said small business “should hold their applause when the government says that there will be interchange reductions of ‘up to 27 per cent.'”
Sands said his discussions with the government indicated that Ottawa was considering a sales volume approach to determining who would qualify for a reduction.
“In a high sales volume but low margin sector like retail grocery, using volumes as the benchmark would punish our small business independent retailers just because they are in the grocery sector,” he said in a statement.
