Credit-card companies 'sticking it to' Canadians with high fees, retailers say

Credit card companies are gouging retailers with transaction fees that cost $4.5 billion in 2007 — and the costs trickle down to consumers, the Retail Council of Canada warned Wednesday as it launched a campaign called "Stop Sticking It to Us."

The council's campaign was launched in conjunction with organizations such as the Alberta Liquor Stores Association, Canadian Booksellers Association and the Hotel Association of Canada. It was timed to coincide with the federal election, set for Oct. 14: the groups are calling on candidates to weigh in on credit card transaction fees.

The council estimates nearly $2 of every $100 Canadians spend using credit cards goes directly to Visa and MasterCard, and their issuing banks.

Most of money comes from so-called "interchange fees" that Visa and MasterCard banks collect from merchants every time a credit or debit card is used to pay for a purchase. The fee varies with the type of card and size of merchant, but is calculated as a percentage of the transaction.

"A $1 transaction and a $100 transaction costs about the same to process, yet the fee is based on a percentage of the total price of the sale — why?" asks a Derek Nighbor, vice-president of national affairs for the council.

It's not a problem only for merchants, Nighbor said, who pointed out that interchange fees eventually trickle down to consumers.

The Retail Council of Canada says that a large part of the interchange fee goes to cover the cost of credit card incentive programs, corporate credit card benefits and junk mail.

Meanwhile the Canadian Federation of Independent Business has launched a separate but related campaign. Shannon Martin, a spokesman for the CFIB, said the credit card companies and banks increased fees businesses must pay in May.

While personal credit card fees increased from 1.6 to 1.7 per cent, business fees increased significantly.

"We had a member who in one month saw their processing fees … increase by over $1,200," he said.

Martin noted that more increases are expected in October.

Credit card companies say fees are reasonable

In a statement released Wednesday, VISA said its interchange rates are reasonable.

"It is important to note that retailers and consumers do not pay interchange. Retailers negotiate what is called a Merchant Discount or Service Fee (MDR) directly with an acquiring financial institution. Visa Canada sets its local interchange rates in response to the competitive Canadian market and they are designed to encourage retail acceptance," the company said.

MasterCard also noted merchants choose to offer credit and debit card service because they offer good value.

"Debit and credit cards represent convenient, secure and globally recognized forms of payment that enable billions of dollars in commerce for Canadian retailers and independent businesses annually," the company said. "Moreover, card payments are more cost-effective than handling cash or cheque."