The Retail Council of Canada, on the other hand, opposes surcharges, preferring that the payments system be subject to binding regulation. “Our fight is about bringing costs down – not simply passing them along to someone else,” chief executive Diane Brisebois.
Some retailers are finding ways around the mounting costs.
One tactic concerns a little-known tribunal consent order from 1996, which allowed retailers to impose surcharges on Interac debit transactions. While in the past very few have collected that fee, the practice has become increasingly popular in recent months as retailers try to recoup rising credit card costs, said one source.
And some are charging extra to accept credit cards despite the strict no-surcharge rule imposed by their card agreements, Mr. Fijal said. “There are some merchants out there already doing this. … Some of our suppliers are, two of them,” he said, while declining to provide names.
For its part, the CFIB is launching a consumer education campaign this month, including a new website, to encourage Canadians to use debit or cash whenever possible.
“If you’re visiting your local drycleaner who you’ve gotten to know over the years … you may say, ‘Let me pull out my debit card rather than my credit card and give the guy a break,’ ” said Daniel Kelly, senior vice-president of legislative affairs.
The Australian example
Credit card surcharges are allowed in several countries, including New Zealand, the United Kingdom and Denmark.
But Australia, where retailers have been able to impose extra fees since sweeping payment reforms took effect in 2003, is considered the acid test, since it was one of the first to ban the card companies’ no-surcharge rule.
It also slashed interchange rates for Visa and MasterCard credit card transactions by almost half, to 0.5 per cent.
Interchange rates are the behind-the-scenes fees that help determine what retailers will eventually pay to accept cards. When those rates fell, merchant service fees for Visa and MasterCard also declined, to an average of 0.86 per cent from 1.45 per cent.
The Reserve Bank of Australia estimates its payment reforms has reduced merchant costs by $6-billion (Australian) since 2003.
There is little evidence, however, that retailers have passed on those savings to consumers. The bank originally predicted cost savings would lower the consumer price index by 0.1 to 0.2 percentage points over the long term. Instead, the inflation rate has increased by an average of 2.5 per cent per year.
Banks, meanwhile, responded to the reforms by hiking annual fees on cards and significantly reducing rewards programs to recoup lost revenue.
As of June, 2010, about 40 per cent of larger Australian merchants applied a surcharge to credit card transactions, as did 20 per cent of smaller retailers.
The average surcharge is about 1.7 per cent for Visa and MasterCard, but a report commissioned by the New South Wales government, published in November, found that extra fee can be as high as 10 per cent.
