The case against Visa and MasterCard that sought to give retailers the right to impose surcharges on credit card transactions, or to refuse them altogether, has been thrown out by Canada’s Competition Tribunal.
The Commissioner of Competition filed the case in 2010, arguing that Visa and MasterCard, the two most dominant card issuers in the market, impose unfair rules on merchants that increase costs for both consumers and small business.
The uptake in consumers using premium rewards credit cards has led small business advocates to lobby for change to credit card agreements. Merchants pay a transaction fee of anywhere from 1.5% to 3% every time consumers swipe their credit card. Some businesses want the right to pass that charge along to consumers, or to simply refuse the high-end cards, something their credit card agreements don’t allow.
If the no-surcharging rule was overturned, it would have allowed retailers to add an extra charge, a retailer checkout fee, to a purchase made with a credit card. Currently, retailers are allowed to offer a discount for cash or debit transactions, but very few do.
Terry Campbell, president of the Canadian Bankers Association, argues that the whole debate about the cost of credit card acceptance ignores the many benefits that accepting this form of payment gives to retailers.
- Credit cards provide retailers with fast, guaranteed payment that can reduce lines at the check-out. If every payment transaction took an extra 30 seconds, that would add another 27 million hours of staff time each year.
- Credit card payments allow merchants to offer customers credit without taking on credit risk. New payment options, such as contactless cards, also benefit merchants and make it easier and faster for customers to make purchases.
“What is often overlooked is that paying with cash is one of the most expensive forms of payment for retailers, if you include time and effort spent handling, counting, reconciling and depositing cash every day, not to mention higher security costs and safety concerns for a store’s employees,” added Campbell.
A Win For Rewards Cards Users
The Tribunal’s decision is a big win for rewards cards users. Ask anyone who’s been to Australia in the last decade how credit card surcharges have benefited consumers. They’ve slapped fees on everything, including online hotel and airline reservations – where you have no choice but to pay by credit card.
Who honestly thinks small businesses would lower prices across the board if this ruling was overturned? Lower transaction fees means more profit for them, and surcharges would just add another profit centre. There would be no benefit to consumers.
What’s your take on the ruling?