Canadian Small Businesses Set to Save $1 Billion with New Credit Card Fee Reductions
Small business owners across Canada will benefit from new reductions in credit card processing fees. These fees, often referred to as interchange fees, are paid by businesses to credit card-issuing institutions like banks for every transaction made using a credit card. These costs, while seemingly small on a per-transaction basis, can add up significantly over time, eating into the profits of small business owners.
Under the new agreements finalized by the federal government, Visa and Mastercard will implement lower interchange rates for small businesses. Specifically, the agreements include:
- A reduction in domestic consumer credit interchange fees for in-store transactions to an annual weighted average rate of 0.95%.
- A 10 basis point reduction in domestic consumer credit interchange fees for online transactions, which could lead to a fee reduction of up to 7%.
For example, a store processing $300,000 in credit card payments annually currently pays around $4,000 in interchange fees. With the new agreements in place, this business could save approximately $1,080 per year, allowing owners to invest more in growth and operations.
“Small- and medium-sized businesses are the backbone of our communities, and today, we are once again delivering real, tangible support to help them thrive. By reducing the cost of credit card transaction fees, eligible small businesses in Oakville can expect to save thousands of dollars over the years, allowing entrepreneurs to put more of their money towards growing their business,” said Anita Anand, President of the Treasury Board.
The reduction in credit card transaction fees isn’t limited to just a few businesses. Over 90% of businesses that accept credit cards are expected to benefit from lower rates, with interchange fees dropping by as much as 27% for qualifying small businesses. These changes will collectively save small businesses in Canada about $1 billion over the next five years.
Small businesses with annual Visa sales volumes below $300,000 and Mastercard sales below $175,000 will qualify for these lower fees. Even non-profit organizations with transaction volumes under these thresholds stand to benefit.
In addition to the reduced fees, the federal government has also introduced updates to the Code of Conduct for the Payment Card Industry in Canada. Effective staring month-end, these revisions are designed to ensure that small businesses are better protected and more informed when it comes to payment processing fees.
Some of the key changes include allowing businesses to compare prices and offers from different payment processors, and reducing the complaint handling response time by nearly 80%, from the previous standard of 90 days down to just 20 business days.
All major payment card network operators in Canada have agreed to the terms of the revised code, ensuring its wide implementation. Additionally, certain technical changes required by the code will be phased in, with full compliance expected by April 30, 2025.
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