Fees for using credit cards | A threat to merchant survival

The sums that merchants can claim after the settlement in the class action lawsuit against Visa and Mastercard are “ridiculous,” says Michel Dépatie, owner of Marché Dépatie in Laval, who worries about the survival of independent merchants and the exorbitant fees that credit card companies always pay each transaction.

Posted at 7:00 am

Nathaelle Morissette

Nathaelle Morissette
The press

The guy, who also serves as the board chairman of the Association of Quebec Food Retailers (ADA), has lobbied for years to get the federal government moving on with the file. He calls for the interbank fees imposed on businesses by the world’s Visa and Mastercards to be reduced every time a customer uses their card to pay their bill. Justin Trudeau’s Liberals also acknowledged this during the last election campaign.

In 2021, Mr. Dépatie paid $250,000 in fees for a total of 300,000 transactions. In comparison, Interac payments cost him $10,000 for the same number of transactions.

According to the Canadian Federation of Independent Business (CFIB), merchants must pay between 1.5% and 4% of the total bill (including tax) each time a consumer pays for a transaction with their card.

Credit cards eat into profit margins in a very, very, very large way. We operate on very low margins in the food business and this has a huge impact on the profitability of the business. It’s a big problem.

Michel Dépatie, owner of Marché Dépatie

Before the pandemic, the credit card usage rate at his supermarket was around 25%. It is now 35%. “If we end up with utilization rates of 75%, 80% or even 90%, that’s the end of independent trading,” he warns.

Credit card use is increasing in the country, according to data released this week by credit analysis firm Equifax Canada. Monthly spend related to this payment method increased by 17.5% in the first quarter of 2022 compared to the first quarter of 2021. In Canada, Ontario recorded the largest increase (20.4%), followed by Quebec, which had an increase of 18.4 % recorded. .

“Reduced demand and increased travel following the easing of COVID-19 restrictions, coupled with skyrocketing inflation, has led to one of the largest increases in credit card spending,” said Rebecca Oakes, vice president, advanced analytics, Equifax Canada in a statement .

class action

In addition, after the settlement of the 2001 class action lawsuit brought against Visa and Mastercard, merchants who apply could receive part of the 131 million to be paid by the two companies. This partially reimburses them for the fees charged by Visa and Mastercard every time a consumer uses their credit card to pay for a transaction. To be eligible for the refund, you must have operated a business between March 23, 2001 and September 2, 2021. Companies must also have paid interbank fees, explains Jasmin Guénette, vice president for national affairs at the CFIB. He describes this decision as “good news”.

Small traders with annual sales of less than $5 million can claim up to $600, and for larger ones, that sum can go as high as $5000. Businesses have until September 30, 2022 to submit their claim.

” It’s ridiculous. It’s nothing, ”says Michel Dépatie, whose annual fees he has to pay for credit cards that far exceed the total amount of the reimbursement. He still wants to press charges.

“Under this regulation, merchants can also collect additional fees from customers using privilege cards in provinces where it is allowed,” stresses Mr. Guénette.

Premium credit cards that allow users to earn points have interchange fees that are much higher than other card types. From October, companies can therefore request an additional sum from customers who use them. Only Quebec will not allow this practice under a provision of the Consumer Protection Act to prevent the retailer from charging too much, explains Jasmin Guénette.

“We want that to change,” he said. CFIB intends to lobby the provincial government on this matter.

For the owner of Marché Dépatie, the real battle revolves around the fees charged for all credit cards without distinction. Otherwise, he warns, “we’re going to hit a wall.”

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