If you want to help local retailers through the pandemic, paying them with a debit card is a good start.
Cash is out of favour these days, which means retailers are relying on electronic payments through debit and credit cards. Retailers pay fees to offer both debit and credit card payments, but debit is cheaper for them.
“Unquestionably, debit is best,” Karl Littler, senior vice-president of public affairs at the Retail Council of Canada, said in an e-mail. “Credit card fees rise with the value of the sale, whereas Interac fees [for debit] are fixed at cents per transaction.”
‘It’s been a sprint’: A new wave of business creation is taking hold
A reader looking to do good for local businesses recently asked for confirmation that debit was really the most retailer-friendly way to pay. Mr. Littler helped settle the matter with an example of a $200 purchase. He said the typical credit card levy – called an interchange fee – would be 1.5 per cent, or $3 in this case. “By contrast, a debit fee is going to be between 20 cents and 35 cents if using Interac Flash (contactless) and lower still for chip-and PIN transactions (card inserted).”
Think you’re doing retailers a favour by paying in cash? Mr. Littler said cash doesn’t have an advantage over debit when you consider time spent counting and making a deposit at the bank, and risks like counterfeit bills.
Paying for things with your credit card does get you reward points. But if you’re dealing with local retailers struggling to survive the pandemic, you could do some good by using debit instead.
Subscribe to Carrick on Money
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
Rob’s personal finance reading list
Canada’s most livable cities (some with very cheap housing)
A survey of cities with a reasonable cost of living and pleasant surroundings. If you’re fleeing a big city for a more affordable location, this is worth a read.
Diversification: Boring, but it works
A portfolio manager on how recent shifts in the stock market make a case for diversification, which some may see as a kill-joy strategy in that you’ll pretty much always hold something that isn’t working particularly well.
The book on personal finance
A Q&A with Laura Whateley, author of a book called Money: A User’s Guide. Key takeaway: “With a bit of knowledge, you will realize that personal finance is not as intimidating a subject as you probably think it is.”
How to get free roadside assistance
Paying for CAA membership to get roadside assistance? You may find your credit card rewards include this service.
Ask Rob
Q: We’re in our 60s. We have a large credit card debt. We’re getting a buyout. Should we use some of this to pay off personal debt or put it in savings?
A: Everyone should have some savings for emergencies – enough to cover expense for at least a month or two. Beyond that, consider paying down debt. Start with credit card debts, then loans and then lines of credit. Mortgages have the lowest rates, so they’re the lowest priority.
Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.
Paycheque profile callout
Globe personal finance is looking for young adults who’d like to share a snapshot of their finances: How much do you earn in a month? How do you spend it? This is a judgement-free zone, a snapshot of the specific challenges the under-40 demographic faces as it tries to find its financial footing. We are specifically interested in hearing from readers whose lives have been impacted by COVID, from artists and small business owners, to freelance workers and first responders. Here are some examples of previous profiles. To participate, please email Globe personal finance editor Roma Luciw.
Today’s financial tool
This Cyber-Security Toolkit was produced by the Canadian Bankers Association – it offers a useful summary of measures you can take to protect your personal financial data from fraud.
The money-free zone
Robert Finley’s Souled Out on You, is my favourite new music right now. Play it loud for best enjoyment.
What I’ve been writing about
- In a hot housing market, we need to check our smugness about owning versus renting
- 2021 ETF Buyer’s Guide: Best U.S. equity funds
- We have to stop blaming clients for the service failures of online brokers
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: How to survive the gig economy • How to get out of debt • Is now the right time to buy a house? • Crisis-proof your finances • Does investing change during a pandemic? • Can you afford to live downtown? • The cost of kids • Should you move back in with your parents?
- ✔️ A 10-point pandemic personal finance checklist: Create a "wartime" family budget; stop worrying about bank deposits; clean out your big-bank savings account; get relief on car payments; get preapproved for a mortgage; WFH? Save $1,000 a month; save, save, save; build resilience by not anxiety-buying; consider the cost of mortgage deferrals; get ready for the second wave of financial distress.
- 📈 Investing: The case for a tight portfolio of big blue chips dividend stocks; robo-advisers beat human advisers (and they’re thriving), why online banks that are better than the branch; is it time to invest your 2020 TFSA; don’t get your mortgage at a bank; why it’s so hard to invest in preferred shares; stock up on stocks to retire early; and are you following the 10-year rule with your investments?
- 💰 Saving: Food waste is wasted money; why you might regret that SUV and find out if CAA is worth it; juice your PC Optimum points; how an ex-Bay Street lawyer got out of debt; blindly easy tweak to your retirement investments to survive economic downturn; should you buy that latte?
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
Rob Carrick