Canadian Businesses Can Now Pass on Credit Card Bills to Consumers Starting on October 6, 2022

Yes, you’ve read the title right. When you use your credit card to pay for businesses in Canada, your merchant may choose to add on top of your credit card bill an extra 1 to 3 percent that banks and payment processors initially charged them for every credit card transaction. Merchants and businesses pay fees every time customers pay using a credit card. This change results from a multi-million dollar class-action settlement with Visa and Mastercard

Many people use their credit cards when spending because of the perks. First, it is convenient. Even without cash at hand, you can purchase all the things you want to spend on. Credit cards are also helpful if you are doing online shopping. When customers use their credit cards for payment transactions, they are rewarded with points and rebates that they can use for other purposes, such as travelling and getting additional discounts. The question now is, who shoulders these costs? The answer: the retailers, merchants, and businesses. They pay these through the transaction fees they pay.

With the new change that started on October 6, 2022, businesses in Canada can now opt to pass on a portion of extra fees directly to their customers who paid using their credit cards. They should inform in advance to their customers though that they will impose this change so that customers are aware of the extra fees they may be required to pay because of using a credit card for their transactions. The question is, will merchants actually charge their customers additional credit card fees, considering Canada is also affected by inflation?

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Now, in reality, this change can help businesses, especially small-scale merchants in Canada, since the cost of running a business is costly. The extra 1 to 3 percent income they will get when their customers pay using their credit cards can help them run their businesses smoothly. However, imposing higher fees can potentially anger their customers. The change also does not work well in an online shopping environment, checkouts, and other online transactions.

In an interview with CTV News, Karl Littler, the Senior Vice President, Public Affairs for the Retail Council of Canada, says that “a merchant could charge a fee concurrent with the use of a credit card, capped at a certain level.” Another open option is for the merchant to suggest to their customers to pay using cash or debit cards to avoid the extra fees. In short, this change is a more hypothetical outcome and is highly unlikely to apply as a practical reality.

As Littler sees it, the solution is not to pass on the extra transaction costs to customers. Instead, it is more of an “upstream” problem that the government can solve—by lowering the fees overall.

Are the majority of Canadian businesses going to charge their customers a credit card fee? Customers will find out in a few days, weeks, or months.