Charges for use of credit card |  A threat to the survival of traders

Charges for use of credit card | A threat to the survival of traders

The sums that merchants will be able to claim after the settlement reached 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 due to fees. exorbitant fees that credit card companies always charge on every transaction.

The one who also acts as president of the board of directors of the Quebec Food Retailers Association (ADA) has been campaigning for years for the federal government to move the file forward. He calls for a reduction in the interchange fees imposed on merchants by the Visas and Mastercards of this world, every time a customer pays his bill with his card. Justin Trudeau’s Liberals had also committed to it during the last election campaign.

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

According to the Canadian Federation of Independent Businesses (CFIB), merchants must pay between 1.5% and 4% of the total amount of the invoice (with taxes) each time a consumer pays a transaction with their card.

Credit cards eat up profit margins in a very, very, very big way. We work with very small profit margins in food and that has a great impact on the profitability of the company. It’s a big problem.

Michel Dépatie, owner of Marché Dépatie

Before the pandemic, in his supermarket, the rate of credit card use by customers was around 25%. Now it has reached 35%. “If we end up with utilization rates of 75%, 80%, or even 90%, that will be the end of independent trading,” he warns.

According to data released this week by the credit analysis firm Equifax Canada, the use of credit cards is on the rise in the country. Monthly expenses 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 is seeing the largest increase (20.4%), followed by Quebec, which registered an increase of 18.4%.

“Compressed demand and increased travel following the relaxation of COVID-19 restrictions, combined with skyrocketing inflation, has resulted in one of the largest increases in credit card spending,” said Rebecca Oakes, Vice President of advanced analysis of Equifax Canada in a statement.

class action

In addition, after the resolution of the collective lawsuit initiated in 2001 against Visa and Mastercard, the businesses that request it could receive a part of the 131 million that both companies must pay. Therefore, they will be partially reimbursed for the fees charged by Visa and Mastercard each 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. Businesses must also have paid interchange fees, explains Jasmin Guénette, CFIB’s vice president of national affairs. She describes this decision as “good news”.

Small merchants with annual revenues of less than 5 million will be able to claim up to a maximum of $600 and for larger ones, this sum can go up to $5,000. Companies have until September 30, 2022, to make their claim.

“It’s ridiculous. It’s nothing”, releases Michel Dépatie, whose annual charges must be assumed by credit cards far exceed the total amount of the refund. He still intends to file a complaint.

“Under this regulation, merchants will also be able to charge additional fees to customers who use privilege cards in provinces where this is allowed,” underlines Mr. Guénette.

Premium credit cards that allow users to accumulate points incur interchange fees that are much higher than other types of cards. Starting in October, companies will be able to claim an additional sum from customers who use them. Only Quebec will not allow this practice under a provision of the Consumer protection law preventing the merchant from overcharging, explains Jasmin Guénette.

“We want that to change,” he said. CFIB intends to put pressure on the provincial government on this issue.

For the Marché Dépatie owner, the real battle concerns the fees applied to all credit cards, without distinction. Otherwise, he warns, “we will hit a wall.”


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