Banks, credit card companies cutting fees charged to merchants

[Wanker]

Good news if you own a business.

OTTAWA—Canada’s major banks and credit card companies have reached a deal with the federal government to cut the fees charged to merchants for credit transactions, sources familiar with the negotiations say.

The voluntary agreement could mean cost savings for up to 700,000 large, medium-sized and small businesses across the country.

However, it remains to be seen whether the cuts will translate into savings for consumers.

The deal will result in lower interchange fees charged to retailers and service providers for using credit cards to complete direct transactions, said sources speaking on condition of anonymity because they weren’t authorized to discuss the matter publicly.

The fees would then be capped for an unspecified period of time.

The agreement comes after years of back-and-forth among retailers, the federal government, banks, credit card companies and the Competition Tribunal.

Interchange fees currently range between $1.50 and $3 or more for every $100 worth of transactions, depending on the credit card.

The federal Competition Bureau estimated in 2010 that credit card acceptance fees added up to $5 billion annually — a figure that has likely grown since — with about $4 billion of that coming in the form of interchange fees.

While the big banks stand to lose millions of dollars from their bottom lines, the sources say the negotiated agreement gives retailers price stability.

There are roughly 76 million credit cards issued to Canadians, who use them to pay for about half their overall purchases.

The Retail Council of Canada says high-cost premium cards have hurt merchants the most.

And says a majority of the savings from recent interchange fee reductions in the U.S. were passed on to customers.

https://www.thestar.com/business/20...panies_cutting_fees_charged_to_merchants.html

 

[Bubba]

Doesn't say how low it will be. Presently we pay 1.65 for Visa and Mastercard and 3.5 % for Amex.

 

[papasmerf]

Doesn't say how low it will be. Presently we pay 1.65 for Visa and Mastercard and 3.5 % for Amex.

Neither is an awful deal

 

[Bubba]

Neither is an awful deal

The 3.5% is. Way too high, there are many retailers now days that do not take American Express because of it.

 

[papasmerf]

The 3.5% is. Way too high, there are many retailers now days that do not take American Express because of it.

as it always has been

 

[Boing]

Doesn't say how low it will be. Presently we pay 1.65 for Visa and Mastercard and 3.5 % for Amex.

Interact is best, only 15-25 cents per purchase.

 

[WhiteLion]

Now days if you pay cash a 15% deduction is required.

 

[oldguyzer]

Doesn't say how low it will be. Presently we pay 1.65 for Visa and Mastercard and 3.5 % for Amex.

Depends on volume, of course. Some businesses get hit as high as 5%, which is exhorbitant.

 

[God]

Never heard of that. Can you give an example why it would hit 5%?.

 

[papasmerf]

Never heard of that. Can you give an example why it would hit 5%?.

As I recall
Sams Club refused to accept some credit cards because of a 5% surcharge.


COSTCO is pretty much so in bed with AMEX

 

[oldguyzer]

As I recall
Sams Club refused to accept some credit cards because of a 5% surcharge.


COSTCO is pretty much so in bed with AMEX

Yep...and when I started accepting credit cards in my business, it was 5% until we built volume.

 

[papasmerf]

Why does the government have to be involved with this? Isn't this just a pure business issue? As posts above said, there are different rates for different cards and some customers and businesses choose not to do business with some cards because of their higher fees. It would seem that the market is taking care of the situation. The only need for government intervention would be if the card companies collaborated to artificially increase the fees to all their customers.

It's simple, if you don't like the fees charged, don't use their services. Do you know why I don't drive a $100,000 car or own a million dollar home or have my dog groomed by Beverly Hills pet stylist...because it isn't worth it to me. So don't do business with a credit card that isn't worth it to the companies. Seems simple enough to me.

It is that type of thinking that leads to people backing away from the Government, lower taxes and more jobs.
The unions will never support this business model.

 

[Curly]

Visa Inc. and MasterCard Inc., facing pressure from Ottawa, have agreed to lower credit-card transaction fees charged to merchants by about 10 per cent.

The two payment networks submitted proposals to reduce their average effective interchange rate in Canada to 1.5 per cent on consumer credit cards, the finance department said in a statement posted on its website Tuesday.

The rate will stand for five years and take effect no later than April, it said.

“As a result of the voluntary proposals, there is no need for the Government to regulate the interchange rates set by the credit card networks,” federal Finance Minister Joe Oliver said in a statement Tuesday.

While the deal could mean cost savings for up to 700,000 businesses of all sizes across the country, it remains to be seen whether savings will be passed on to consumers, the Star’s Madhavi Acharya-Tom Yew reported Monday.

Interchange fees range between $1.50 and $3 or more for every $100 worth of transactions, depending on the credit card.

In 2010, the Competition Bureau estimated that credit card acceptance fees added up to $5 billion annually. Banks collect an estimated $4 billion — about 80 per cent — of those fees.

Prime Minister Stephen Harper’s Conservative government, which has been rolling out consumer-focused policies ahead of next year’s federal election, pledged in its 2014 budget to take additional measures to lower card fees for retailers, a move that would also reduce revenue for Canada’s banks. Merchant groups including the Retail Council of Canada have been the biggest advocates for government action on the fees, which the government claims are among the highest in the world.


“These commitments represent a meaningful long-term reduction in costs for merchants that should ultimately result in lower prices for consumers,” Finance Minister Joe Oliver said in the statement.

In a separate statement, Visa said it is entering the agreement on the expectation there will be a level playing field in the industry.

“If Visa or our clients are disadvantaged as a result of entering into this undertaking, Visa reserves the right at any time to terminate or amend it,” the Foster City, California- based company said in a statement.

American Express, which negotiates its fee directly with merchants, has not submitted a proposal to reduce their credit card fees, the finance department statement said.

“American Express was not part of the probe by the Competition Bureau,” Oliver said. “However, I am pleased to see that American Express has committed to maintaining its current business model.

“Nevertheless, if there is a fundamental shift in the marketplace and it is determined credit card networks other than Visa and MasterCard exert market power or will soon exert market power, the Government will expect that those networks voluntarily commit to reduce their credit card fees in line with the current voluntary proposals submitted by Visa and MasterCard.