Many Canadians, weary from a year of navigating the rising cost of living, say big companies planning to charge them a fee for paying with a credit card could end up losing their business.
More than two in five people say they’d take their money elsewhere if a major retailer, airline or telecom company charged them a 1.5 per cent processing fee to use a credit card for purchases, according to a survey from the Angus Reid Institute. People are slightly more understanding when it comes to small businesses, however. A 1.5 per cent surcharge for using credit would result in 28 per cent finding another store to shop at.
It’s not just businesses that could suffer from the wrath of consumers forced to pay extra fees: the credit card giants face repercussions, too. Three in five people say they’d keep their credit cards in their wallet and pay with cash or debit instead if a big company tried to pass on the surcharge. In the case of small business customers, more than half would switch to another form of payment.
The implications are even bigger when it comes to credit cards attached to loyalty programs. Eighty-two per cent of people say their main credit cards are connected to a cash-back, points or other loyalty scheme, and many fear a surcharge could eat into their ability to collect those points. As a result, 61 per cent say a universal 1.5 per cent surcharge on purchases made with credit would be enough to stop them from using their cards completely.
“This data is pretty stark and pretty unequivocal,” Shachi Kurl, president of Angus Reid said in an interview on BNN Bloomberg Tuesday. “Canadians are expressing that number 1, we’re really not able to absorb these costs. Number 2, we’re really not inclined to absorb these costs, and number 3, there can be consequences for businesses that impose those costs and for the credit card companies.”
That should give all the major players pause, she said, even as Canadians use credit cards more than ever. Cash has fallen out of favour since the start of the pandemic, fuelling a surge in credit card use, the survey said. Now, more than 60 per cent of people say they use credit for at least half of their purchases. That data is showing up in Canadians’ mounting credit card debt, with the average balance hitting a record $2,121, and usage at “historic highs,” Equifax Canada said in a report released Nov. 1.
Credit card companies charge businesses a processing fee of between 1.4 and 2.4 per cent for every sale made via credit. Retailers only recently received the power to pass on those fees to customers, as a result of a settlement in a class action lawsuit against Visa Inc. and Mastercard Inc. Until Oct. 6 of this year, companies had been forced to absorb the surcharges, a point of contention among small businesses in particular, who argued that the credit card giants were unfairly squeezing their already thin margins.
The Canadian Federation of Independent Business (CFIB), a small business lobby group, framed the ability to pass on the fee as a win for entrepreneurs. “Small businesses have long been dealing with expensive credit card processing fees and trying to find ways to absorb the cost of accepting premium cards without the ability to surcharge or refuse those cards,” Corinne Pohlmann, senior vice-president of national affairs at CFIB, said in a news release in October. “Surcharging gives them the ability to offset some of their costs and be transparent with their customers about the fees they pay.”
Dan Kelly, CFIB’s president, said the newfound power to pass on the fee would also help businesses “push back against future credit card fee hikes.”
However, many small business owners remain leery of implementing the charge. Only 20 per cent are planning to pass the fees on to their clients, and more than a quarter said they’d only implement the practice if their competitors or suppliers do, according to CFIB.
Among bigger companies, Telus Corp. is the only one so far that has opted to tack on a 1.5 per cent fee for credit-card payments, which would amount to an extra $1.58 on $100 worth of services.