"While banks and other card issuers have had high cost corporate cards for a long time," Kelly stated, "over the last two years, many financial institutions have been pumping out premium credit cards to consumers." Regular cards may cost small business under 1.75 per cent of the sale in total fees while some premium cards cost over 2.7 per cent.
"Small merchants are asking all Canadians to examine the card in their wallets against the list CFIB has issued to check if their card is imposing high costs on local entrepreneurs," Kelly said. "The credit card industry is so confusing, consumers holding a President's Choice MasterCard, for example, may think they are using a low cost, budget card, but in fact may be forcing merchants to pay 2.5 per cent of their entire purchase in fees to accept the card. This is over 40 per cent more in total fees than a consumer using a regular MasterCard. A consumer collecting Aeroplan points with a CIBC Aerogold Infinite VISA can cause a merchant to pay 30 per cent more in fees than one collecting Aeroplan points with a CIBC Aerogold VISA," Kelly advised.
Several interesting stories emerge from CFIB's analysis:
- New "uber" premium cards from MasterCard: Recently, MasterCard introduced an even more expensive credit card for some merchants. MasterCard World or World Elite cards issued by Bank of Montreal, CIBC, Royal Bank and Capital One are called "premium high spend" cards and can carry among the highest merchant fees out there.
- BMO/CIBC top issuers of high cost consumer cards: Of the major banks, Bank of Montreal and CIBC are the main issuers of "premium" credit cards for consumers in Canada - each with six separate high cost cards. TD Canada Trust and Scotiabank have the fewest premium consumer cards of the major banks, with one each.
- Some banks do better: Of the smaller financial institutions, CFIB is pleased to note that all credit unions, Desjardins, MBNA (recently purchased by TD Canada Trust) and Laurentian have no premium cards for consumers. On the other hand, HSBC has three of its four cards in the premium category.
- Consumers can still get points without higher costs for merchants: Many cards that offer points and rewards to consumers are actually regular credit cards and do not impose higher rates on merchants. For example, the TD Platinum Travel VISA and the ATB Gold Cash Back MasterCard provide consumer benefits at regular merchant costs.
- Card names don't tell the whole story: Some premium cards have special names like VISA Infinite, but other cards, like MasterCard "high spend" cards keep the same name but increase the costs to merchants once a consumer hits a certain spending or income threshold and gives consent. Most cards with "gold" or "platinum" in their name are actually regular cost cards.
- American Express cards impose very high costs: While CFIB is pleased that American Express does not issue separate premium cards, all of its regular cards impose very high costs on smaller merchants.
- CIBC drops a premium card: After CFIB announced its plans to do this analysis, CIBC voluntarily dropped its "high-spend" Aventura MasterCard into the regular cost category. CFIB notes this is a very positive development and hopes other financial institutions consider doing the same.
"As all polling data shows Canadians have enormous respect for small business owners, we ask consumers who may have a higher cost premium or corporate credit card to consider switching to one from the regular cost column," Kelly suggested. "The good news is that there are dozens of credit cards out there offering consumers points without imposing sky high fees on smaller merchants."
CFIB also notes that thousands of merchants have recently started to post special CFIB signage in their stores to encourage consumers to pay with lower cost payment methods. "When you visit a smaller merchant, we ask you to consider paying with a regular cost credit card, your Interac debit card or cash in order to help merchants keep costs down," Kelly said. "In addition to helping your local entrepreneurs, you'll be helping keep consumer prices down for us all," he concluded.
Click here to download CFIB's credit_card_rate_chart