he first decided to accept credit cards at his Ottawa Street children’s shoe
store in the early 1970s.
He opted for the benefits, as most merchants eventually did, and never looked
back. The convenience of credit cards has been positive for customers and the
65-year-old Karen’s 4or Kids shop Blaine now runs with a partner.
But like many retailers in Canada, his frustration with the country’s two
dominant credit card companies is mounting.
“The fees have gotten out of control,” Blaine said. “Almost every six months
you get a notice from Visa or MasterCard about another fee you have to pay.
That’s been going on for five or six years.”
Visa sent him a 45-page fax when he asked for a breakdown of the fees for its
different cards and types of transactions, as well as other services for which
merchants are charged, he said. “My fax machine nearly blew up.”
Customers don’t realize retailers are being forced to pay for an increasing
share of the perks they are offered with their cards, he said
That beef was at the heart of a case Canada’s Competition Tribunal ruled on
earlier this week. It dismissed a complaint alleging the rules Visa and
MasterCard impose on merchants eliminate competition and increase costs to
businesses – and ultimately consumers.
Under the agreements merchants are not allowed to refuse any of the
companies’ credit cards. They also cannot charge customers a fee for using a
credit card, even if it is a premium card – like those offering reward or travel
points – for which retailers pay higher fees per transaction. Blaine noted he
pays more for U.S. card transactions, as well, which wasn’t the case in the
The card companies argue these stipulations benefit consumers.
In fact, the Consumers’ Association of Canada and the Consumers Council of
Canada hailed the tribunal ruling. Both non-profit groups issued statements
saying consumers shouldn’t be confronted with additional charges at the cash
register or have to deal with the confusion of merchants accepting some, but not
all, of a company’s credit cards.
The bottom line, however, is that businesses that accept credit cards either
have to eat the cost or pass it on through higher prices, say organizations like
the Canadian Federation of Independent Business.
“Very few Canadians know that they pay $5-7 billion each year in credit card
processing fees embedded in the cost of everything we buy,” federation president
Dan Kelly said in a statement issued after the ruling.
Merchants pay 1.5 to three per cent of the purchase price per credit card
transaction and more for premium cards. That’s compared to five to eight cents
per transaction when they use a debit card, Blaine said.
The bulk of those fees go to the banks and other financial institutions that
issue the credit cards. Credit card companies, in turn, charge the banks for
services they provide.
“It’s complicated,” Blaine conceded.
And it’s not over yet. There are already proposed class action lawsuits by
retailers against card companies and banks following similar tactics used in the
United States. In Europe, regulators are considering a cap on fees.
All small retailers like Blaine can do is wait and hope customers use their