Many Canadian small businesses could soon save hundreds of dollars a year on expensive credit card feeThanks to an agreement between Ottawa, Visa And master card,
The deal will allow eligible small businesses to pay less on credit card transactions by reducing interchange fees paid to banks.
Ottawa expects 90 per cent of Canada’s small businesses to qualify for the reduced fee, saving companies an estimated $1 billion in total over five years.
The final arrangement was announced Thursday in Brampton, Ont., by Finance Minister Chrystia Freeland. It was first teased in the 2023 federal budget in late March.
On Thursday, Freeland claimed that cutting costly interchange fees could benefit both small businesses and their customers.
“Canadians pay some of the highest interchange fees in the world, and this lowers profit margins for small businesses and drives up prices for Canadians,” she said.
Businesses that process less than $300,000 in Visa payments and less than $175,000 for MasterCard during the year will qualify for the relief, which will reduce interchange fees by up to 27 percent from the current weighted average.
In an example drawn up by Finance Canada, a sporting goods store with $300,000 in annual credit card transactions split between Visa and Mastercard would typically pay about $4,000 a year in interchange fees.
Under the new system, that business would pay $1,080 less each year, the ministry said.
Dan Kelly, president of the Canadian Federation of Independent Business (CFIB), spoke with Freeland on Thursday and said credit card relief is especially important in the wake of the COVID-19 pandemic.
Not only have small businesses been hit hard by the sporadic shutdowns and in some cases heavily indebted to survive, but many businesses have also been pushed online to serve Canadians during the lockdown. Kelly said this meant a large portion of their sales were processed through credit cards, which come with higher fees than other in-person transactions.
“These tariffs put enormous pressure on the bottom lines of businesses as they try to navigate the road to recovery,” he said.
“Any relief on any of the major expenses of a business is very helpful for small businesses which are at a critical time.”
last fall, Canadian businesses were Permitted to introduce credit card surcharge on transactions to offset some processing costs.
According to Finance Canada the change to the interchange fee structure will not affect existing credit card rewards arrangements with Canadian banks.
The new credit card fee plan is expected to debut in the fall of 2024.
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