Businesses in Canada Can Start Charging Credit Card Fees on Oct. 6

1 in 5 Canadian businesses considering adding surcharge to credit card transactions

Credit cards as seen July 1, 2021, in a file photo. (The Canadian Press/AP/John Raoux)

Canadian businesses will now have the option of applying a surcharge to credit card transactions, but only about one in five merchants are considering imposing the additional fee on customers, according to a Canadian Federation of Independent Business (CFIB) survey.

Starting Oct. 6, 2022, businesses will be able to charge an additional fee at the point of sale if a customer wishes to pay by credit card. The new rules come after a class action lawsuit settlement that required Visa and Mastercard to allow merchants to decide if they want to pass on the cost of accepting credit cards to their customers.

Before the lawsuit, banks would not allow businesses to charge credit card fees, saying it would deter people from using them. The option of a surcharge will not be available in Quebec due to consumer protection laws.

In the CFIB survey, 26 percent of businesses said they would add a surcharge if their competitors do, 40 percent said they are not sure yet, and 15 percent said they would not add the surcharge.

“Most smaller merchants are still on the fence or don’t plan to surcharge as they don’t want to risk losing customers. However, it’s important for them to know they will have this option,” said Corinne Pohlmann, senior vice-president of national affairs at CFIB, in an Oct. 5 release.

The survey found that businesses that serve customers directly were less likely to add a surcharge, while businesses that mainly interface with other businesses were more likely to add a surcharge.

The survey also found that 35 percent of businesses are currently encouraging their customers to use other forms of payment and 28 percent are raising their prices to cover credit card fees.

“Small businesses have long been dealing with expensive credit card processing fees and trying to find ways to absorb the cost of accepting premium cards without the ability to surcharge or refuse those cards,” said Pohlmann.

Surcharges Capped

According to CFIB president Dan Kelly, the data from the CFIB survey reveals “the frustration so many business owners feel about the high cost of credit card processing,“ which he says works out to around ”1.5 to 2.5 percent of every sale.”

Surcharges will be capped at 2.4 percent, or the amount it costs the business to accept the credit cards–whichever is less.

“The power to surcharge will allow merchants to address their rising operating costs, push back against future credit card fee hikes and keep their prices competitive,” Kelly said.

“With mounting pressures small businesses are facing due to inflation and government-imposed costs, surcharging is another way to reduce their cost burden,” he added.

Businesses that had to pay credit card fees in Canada between March 23, 2001, and Sept. 2, 2021, may still be eligible for reimbursements of up to $250 per year for their potential loss in fees. The final deadline to apply is Dec. 30, and Sept. 30 was the deadline for making undocumented and simplified claims.

Telus has already announced that they will charge a 1.5 percent fee for credit card transactions and suggest that customers use other payment methods.

CFIB says there must be fair disclosure of the charge and that businesses will have to create posters or other messaging that shows they are adding a surcharge. They suggest telling customers the reason for the fee and explaining how they can get around it. Further, they say the amount of charge should be disclosed on receipts and disclosed during the transaction, even if it is online or by phone.