Comment by klyrs
4 years ago
In Canada, we finally passed a law to allow merchants to add a credit card surcharge. People accustomed to getting free rewards will be paying up to 2.4% for the privilege. And yes, they're crying about it.
4 years ago
In Canada, we finally passed a law to allow merchants to add a credit card surcharge. People accustomed to getting free rewards will be paying up to 2.4% for the privilege. And yes, they're crying about it.
> In Canada, we finally passed a law to allow merchants to add a credit card surcharge. People accustomed to getting free rewards will be paying up to 2.4% for the privilege. And yes, they're crying about it.
Didn't the CTRC ultimately reject this? Or are you talking about broader legislation? https://www.canada.ca/en/radio-television-telecommunications...
Either way, it's a bit tone-deaf to say that people are crying about not getting free rewards. Many people are upset because companies like our notoriously anti-competitive telecom industry already factor merchant fees into the costs; adding on a separate charge is essentially double-dipping in a time of record inflation and profiteering.
The CRTC disallowed Telus from doing this, but every merchant not covered by the CRTC is now allowed to disregard any "best price" clause in their credit card agreements.
I expect the first merchants to take advantage of the new rules will be some of those Mom & Pop stores that currently have the "minimum $10 for credit card" signs.
Did the CRTC disallow or say they couldn’t until a review or hearing was complete? I thought they just delayed (for now)
The first merchant I observed taking advantage of the law was the RCMP, for what it's worth.
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Sure, that's an interesting case. The CRTC's ruling, if I'm reading that right, is narrow and only impacts telecoms. I do see that as a good thing. What I'd really want is for merchants to be able to pass exact interchange fees on to the customer with no overhead -- which, alas, isn't what the law encourages, along with a cap on interchange fees like was done in Europe (TIL).
This is allowed in the US. But it's not like the surcharge is tied to the amount of rewards on the card, at least here. If you have a no-rewards card, you pay the same surcharge as if you have a upper-tier Amex. And since most places don't make it very obvious that they're charging a cc surcharge, customers generally don't even realize they're paying it.
I was not thrilled when I saw it on my receipt, after not being told there was a credit card charge. I don't mind a surcharge but it felt like a cash-grab because they didn't tell people (or ask them, which would be even better).
Cash and check handling also have costs through leakage and bank fees (at least in the US banks charge money for taking cash deposits from businesses). Many merchants are happy to take credit cards and just mark up the price accordingly. Ask the Cannabis industry about the hassles of handling cash.
IMO it's much better to do it the EU way - cap on the fees, and a ban of adding a surcharge for cards (because now they're competitive if not cheaper than handling cash).
Meanwhile in Europe we just aggressively capped the fees card networks can charge merchants. No one has rewards but everyone benefits from cheap card payments.
This is the correct way.
I disagree with this. This assumes that cash is the baseline. And all too often the cost of handling cash is not taken into account when comparing it to credit cards.
Debit is my baseline. It's unfortunate that banking technology is so far behind; in Canada, anyway, debit doesn't incur interchange fees. That's great at point of sale, but notably kludgy for bill payments.
Some merchants were already allowed to add a credit card surcharge. Some post-secondary institutions did this for years before this change came in.
The funny thing is that, apart from the aforementioned post-secondary institutions, I haven't seen anyone else add this surcharge. Maybe I'm just not shopping in the right places, but so far this change has amounted to absolutely nothing.
Merchants weren't allowed to do that before? I've seen it occasionally in the US
It used to be the case that the credit card companies put language in their merchant agreements language requiring the merchant to change the same price for credit and cash transactions. I'm not sure how many places they just lost the leverage to do that sort of thing and how many places enacted legislation to prevent that kind of strong-arming.
In the US, those merchant agreements were invalidated as of 2011 via the Dodd-Frank financial reform legislation.
I’ve seen it occasionally too, but it’s usually a violation of a merchants’ agreement with Visa/MC, who don’t want consumers to be discouraged to pay with their product.
How I usually see this is instead of a surchage for credit card, stores offer a cash discount of 2-4%. Likely to get around exactly what you're talking about
Interesting to hear this. I was once visiting Canada about a decade ago and tuned in to a radio station (likely some local CBC station), and they were debating this very issue: Can it be made legal for businesses to charge more for CC transactions?
I learned one thing:
The amount a CC charges the business is not fixed - and cards with rewards result in a higher fee for the business.
At some point a retired CC industry shill (who clearly identified his background) called in and his explanation on all this was the most reasonable:
In the vast majority of cases, a business's revenue goes up by accepting CC payments. Some of it is because customers have become accustomed to paying with it and may not carry cash, but the bulk of it is due to the convenience - and this is heavily backed up by research: The easier and more convenient you make transactions, the more consumers spend. The amount businesses pay the CC company in fees is more than compensated for by the increased revenue.
Most businesses will treat these fees as part of the cost of doing business, and price their products accordingly. Just as they do when their utility rates go up or the price of gas goes up.
Businesses support the campaigns about this issue so that they can get the best of both worlds: Increased revenue due to CC usage as well as passing those fees on to the consumer. They are not waging this battle to benefit the consumer, but to offload a cost of doing business to the consumer. In principle, this is all fine, but the consumers need to be aware of it! Ultimately the consumer is paying those fees whether a business charges extra for it or not.
And of course, if the goods that business is selling is priced the same as other businesses not passing that charge on directly, then the consumer is "double paying" - the goods' price already has that fee baked into it even if they pay cash, and when they pay by card, they'll pay it twice at those businesses.
Having known some business owners, his take is highly believable :-)
As an example, the AirBnB cleaning fee is not just for cleaning, but a way for the host to make extra money (easy to Google, and I know multiple hosts personally). Almost any business that charges extra for optional amenities is using it as a way to make even more money.
And that was the CC shill's ultimate point. CC companies are doing things to increase their revenue, as are the businesses. A given business may say they're campaigning for this in order to benefit the consumer, but in most cases they're not really benefiting the consumer and are simply trying to increase their revenue. The exception is when they really do have reduced prices compared to other stores.
> The amount a CC charges the business is not fixed - and cards with rewards result in a higher fee for the business.
It should be noted that most businesses have limited visibility into that. The monthly bill from whatever company handles their card processing usually charges a fixed rate, or has multiple tiers of fixed rates, and all the merchant sees is that on their bill they are told the number and total amount of transactions for each tier.