Every time shopowner Kim Borle receives her monthly statement for credit card transaction fees, she feels a little more desperate. This month her charges came to $1,414, with an added $28 plus tax per month for renting the credit card machine at The Bookstore on Perron Street.
"We lose a lot of money per month on the credit card fees. I'm talking huge," she said.
"They all want their points and they want to go traveling around the world so they would get really offended it they can't use their American Express."
The federal Competition Tribunal recently dismissed a complaint from Canadian retailers about the way credit card companies charge for processing transactions.
Retailers wanted the right to refuse premium cards (also known as reward or point cards) that charge more than the base fee attached to regular credit cards. But under current rules, retailers aren't allowed to choose what versions of credit cards they accept.
While debit cards have a fixed fee of seven cents per transaction, premium cards cost merchants up to 2.65 per cent of the transaction cost, compared to 1.54 per cent for regular credit cards. In total, credit card companies make about five to six billion dollars a year by charging different fees to retailers.
Retailers asked for the rules to change so they would be able to reject higher-fee cards while still accepting other cards, or possibly add an additional cost for customers that pay with premium cards.
Reasons for the dismissal of the complaint remain confidential. But Gabrielle Tasse, senior communications advisor with the Competition Bureau, said they would review the decision in the coming weeks and release more information to the public.
Nonetheless, the decision was disappointing and leaves many small businesses struggling, said Richard Truscott, Alberta director with the Canadian Federation for Independent Business (CFIB).
"The balance of power in this economy has been clearly in favour of the big credit card companies for many years now," he said.
"We were hoping this was an opportunity to rebalance the system a bit and tilt things a little more in favour of small merchants."
Voluntary failure
Truscott said credit card companies have been quietly introducing high-cost cards with new fees and regulations over the past few years. The market depends on a voluntary code of conduct but that seems to have failed, he said.
The CFIB is now looking to lobby the federal government to introduce a cap on transactions. This concept is already used in countries such as Australia, or the E.U., which recently limited transaction fees to 0.6 cent of the price of the service, he said.
He added that Canada lags behind other countries because the public is often unaware that merchants are paying billions of dollars so consumers can enjoy the perks of points and travel benefits.
Campaigns such as Visa's "smallenfreuden" adds to the problem as they encourage customers to use credit cards for very small purchases, which translates into thousands of charges for merchants.
"Basically (credit card companies) can charge whatever they want," he said.
"There is a limit to what the market can tolerate but the underlying problem is that the public is generally not aware that these fees are built into the price of all the goods and services they buy."
To better inform consumers of the problem, the CFIB introduced the Credit Card Fee Fighter kit, which includes a sign that encourages customers to pay with Interac (debit), cash or even cheque in store.
But Angela Phelps, co-owner of Cranky's Bike Shop in St. Albert, said it would be bad business to add the fees to the cost of the product. She accepts the fees as a necessary cost of doing business – having to sell higher priced items such as bicycles – but would like to see a cap put on them.
"If I went to a store and they would tack on an extra two per cent I would also not be impressed," she said. "I think a cap on the fees themselves, if they said 'OK, any premium credit card, the max would be 0.5 per cent' that would be perfect."
Borle also pays the fees for transactions out of her own pocket. Even if it was legal, she would not ask customers to pay extra for using a premium card because it could deter them from coming back, she said.
Instead she kindly asks if they preferred using cash or debit.
"Just because it's hard enough getting to sell the product. Never mind asking them to pay an extra fee," she said. "You have to compete out there … You start raising your prices too high and they are not going to buy."
