Credit card fees a hot-button issue with voter appeal

Credit card fees, including the higher costs merchants pay for accepting premium cards, is one of the issues that may come under federal Finance Minister Jim Flaherty’s scrutiny as part of Tuesday’s budget.

In a case last year, Canada’s Competition Tribunal refused to rule on whether merchants could levy a surcharge for consumers to use premium cards, or refuse the cards altogether because of the higher prices they pay to Visa and MasterCard every time they accept a gold or platinum card.

Instead, the tribunal suggested that the government deal with the matter through regulation, throwing the issue back to Flaherty to deal with.

The finance minister pledged to “carefully review” the issue and asked a special committee that discusses payment issues to consult with retailers and credit card issuers.

Last fall’s throne speech seemed to indicate that any new measures Flaherty adds into a budget with a focus on austerity will be geared to protect consumers, and saying no to credit card surcharges is a hot-button issue that could earn him voter support.

Thorny issues

But the issue of how to deal fairly with both merchants and credit card companies is much thornier.

For regular credit cards, there is a fee for retailers beginning at 1.5 per cent of transaction value, but premium cards may charge a higher percentage (three per cent or more on some cards) of each purchase – which can add up to a much higher cut going to the credit card companies.

As things stand now, merchants are not permitted to charge extra for paying via credit card.

Ontario MP Glenn Thibeault, the NDP consumer protection critic, says the rising costs of credit card payments are hindering Canadian competitiveness.

“While governments around the world have regulated the costs of credit card swipe fees, the Conservatives’ self-regulatory approach has failed Canadian merchants," he said in an email statement.

"Enough is enough; the Conservatives need to act now. They like to pretend they are good fiscal managers, but when it comes to the well-being of consumers, the reality is the Conservative record is dismal,” Thibault added.

The Canadian Association of Retired Persons sent a letter to Flaherty last fall, suggesting that people who pay cash should actually get a discount on their purchases, because it costs the merchant much less to handle their payment.

Cap on fees

CARP said its members believe merchants should absorb fees from the credit card companies – or any future form of electronic payment – as a cost of doing business. But it also raised the issue of putting a cap on fees from the credit card users, so merchants are not at a disadvantage.

That would play well with the retailers, who feel that credit cards are taking a bite from their bottom line, but might not be well received by the credit card companies.

Senator Pierrette Ringuette has reintroduced a bill in the Senate to cap credit card acceptance fees paid by merchants at 0.5 per cent of the value of the transaction

In its throne speech last fall, the government also pledged to protect consumers against unwarranted fees for paper bills. Cable and telecom firms have started tacking a $2 fee on any bill that arrives via mail, a charge they say is the cost of handling a paper bill. If Flaherty demands an end to that fee, it will prevent credit card companies following suit.