Finance minister in Brampton to announce reduced credit card fees for Canadian small businesses
The federal government says it is reducing fees paid by small businesses for credit card transactions, something it hopes will also drive down prices for consumers.
Finance Minister Chrystia Freeland announced today (May 18) that Canada has reached agreements with Visa and Mastercard to reduce credit card interchange fees for most credit card-accepting businesses starting in 2024.
Interchange fees, which are paid by retailers whenever a customer uses a credit card to make a purchase, are paid to the card-issuing bank to cover handling costs and other potential costs related to fraud or debt.
According to Freeland, about 90 per cent of credit card-accepting businesses in the country will see lower fees.
Eligible small businesses could see their fees reduced by up to 27 per cent; specifically, businesses with annual Visa sales below $300,000 or annual Mastercard sales below $175,000 will quality for lower interchange fees from the respective credit company.
For a small business with $300,000 in annual credit card sales, for example, Freeland says the reduced fees could save the business up to $1,080.
“Canadians pay some of the highest interchange fees in the world, and that lowers the profit margins for small businesses and drives up prices for Canadians,” said Freeland, who made the announcement at Knowledge Bookstore, a Black-owned bookstore in downtown Brampton.
“With more Canadians using credit cards than cash, a trend that we have seen especially since the pandemic, those fees can really add up for a small business like this one.”
For qualifying small businesses, Visa and Mastercard have agreed to:
- Reduce domestic consumer credit interchange fees for in-store transactions to an annual weighted average interchange rate of 0.95 per cent
- Reduce domestic consumer credit interchange fees for online transactions by 10 basis points, resulting in reductions of up to 7 per cent
- Provide free access to online fraud and cyber security resources to help small businesses grow their online sales while preventing fraud and chargebacks
Today, the government announced it is delivering on the #Budget2023 commitment to lower credit card transaction fees for #SmallBiz, while also protecting reward points for Canadians.
Learn more: https://t.co/fvfGUDUnp8 pic.twitter.com/iyToQIAbuV
— Finance Canada (@FinanceCanada) May 18, 2023
Freeland stated that the reduced fees would be implemented while maintaining the reward points Canadians receive from their credit cards.
The finance minister was joined by Mary Ng, minister of small business and economic development, Sonia Sidhu, MP for Brampton South, and Dan Kelly, president and CEO of the Canadian Federation of Independent Business.
“Small businesses make up 98 per cent of all businesses in Canada and employ more than 10 million Canadians. They play a critical role in our economy,” said Sidhu, who applauded the federal government for reducing interchange fees paid by businesses.
The new change is one of the commitments that was laid out in Canada’s Budget 2023 plan.
The new interchange rates are expected to come into effect in fall of 2024 to allow time to complete the required system updates.