Greenhouse Canada

Business Management
CFIB calculates the high cost credit cards

September 15, 2011
By Canadian Federation of Independent Business


debitcredit.jpgNEWS HIGHLIGHT

CFIB calculates the high cost
of credit cards

After significant negotiations with Canadian credit card companies,
the Canadian Federation of Independent Business (CFIB) released a
comprehensive list of the cost levels of nearly every credit card in the
wallets of Canadian consumers and businesses.

Sept. 15, 2011 – After significant negotiations with Canadian credit card companies,
the Canadian Federation of Independent Business (CFIB) released a
comprehensive list of the cost levels of nearly every credit card in the
wallets of Canadian consumers and businesses. "There are a staggering
number of cards on the market today in Canada, with over 200 MasterCard
and VISA cards on our rate chart alone," said Dan Kelly, CFIB's sr.
vice-president of legislative affairs. "Consumers and small businesses
have had virtually no ability to understand the costs their cards impose
on merchants until today," Kelly added.


"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

"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 pdf credit_card_rate_chart