CFIB urges caution as credit card processing fees to drop

Some of the fees merchants pay on credit card transactions will go down from 1.5% to 1.4% on average starting in April 2020, as a result of an agreement reached by the federal government with Visa and Mastercard last year.

In a statement, The Canadian Federation of Independent Business (CFIB), said it is pleased by this latest victory for small business but warns independent merchants to protect themselves from misinformation and unfair contracts.

"CFIB has been battling for fairness for over a decade and we are pleased to see that the federal government and the big credit card companies are listening," says CFIB president Dan Kelly. "We have come a long way from the years where fees were rising by 20 to 40% as a result of new tiers of premium credit cards."

Caution to merchants

While these announcements are very good news, CFIB warns small business owners to be vigilant to ensure the savings are passed along to them.

"In dealing with payment card processors, almost a third of small merchants report harassing phone calls, 18% have experienced misrepresentation and 16% said they've experienced deceptive sales practices," Kelly says. "There are several good processors who work hard to serve small businesses, but many small businesses have fallen victim to terrible sales practices, including abusive use of exit penalties in contracts offered by some processors."

Not all fee changes are good news
In addition to the expected fee decreases, CFIB has started to receive complaints about new credit card processing fees. For instance, Mastercard is introducing a new fee on returns/refunds and preauthorizations. And while interchange rates for in-store Mastercard transactions are expected to see a meaningful reduction (up to 29%), e-commerce businesses may see increases in the fees they have to pay for some categories of cards.

"We are analyzing the full suite of changes and will continue to work with the major credit card brands, governments and the payments industry to ensure that small firms are treated fairly," concluded Kelly.

Merchants choosing a new payment processor can review CFIB's tips on how to avoid unfair contracts.