Canadian Credit Card Processing Wars
April 28, 2009 by Matthew Hunt · Leave a Comment
Tim Wilson at the NationalPost wrote yesterday an interesting piece on Canada’s Credit Card Wars over regulating interchange and allowing Visa to introduce debit cards in Canada.
Tim states, “While we respect businesses’ desire to manage their expenses, government intervention is not the right solution in a functioning industry.”
I know many Merchants who would be as fast as a wild cat and pounce on this statement. However, after reading more of what Tim had said in his article reminded me how important credit cards are to a business. Tim states:
“Retailers benefit from the speed, efficiency and reliability that only electronic payments can bring. They also receive guaranteed payment and can avoid the need to extend credit directly to their own customers. According to the economics firm Global Insight, over the past two decades, electronic payments have contributed $122-billion to the Canadian economy, which represents nearly 20% of our total GDP growth over the same period.”
In reality, without credit cards businesses would not be able to be as profitable as they are. Just try and imagine how a website would be able to transact without the ability to accept credit cards or even by phone. How would your business sales be without credit cards…?
The REAL ISSUE (if you read between the lines) that merchants are really complaining about is they feel they are paying too much in fees. It always comes down to the “$”.
Now I am all for keeping Merchant processing fees as low as possible. The issue really isn’t Visa and/or Mastercard with their Interchange rates because the interchange rates are not that high. If you have really high rates it’s usually due to your credit card processing company. This is Moneris, Global Payments, Chase-Paymentech, Elavon, First Data, TD Merchant Services, and other sub ISO’s who also broker credit card processing services. They make their money by marking up on top of the interchange rates and they really understand interchange.
Let’s use Tim’s example of:
“Visa Canada’s premium product, the Visa Infinite card, is available to a small subset of cardholders and its interchange rate, which is the small amount of money transferred from one financial institution to another each time a Visa product is used, is one fifth of one percent (0.2%) higher than other card products.”
What merchants don’t understand is how interchange really works and how the Merchant Account companies that sell/set-up merchants are the ones who can sometimes mark-up those rates big time. So if the card present buy rate for a non-reward card is approximately 1.6% for most categories of business and then the infinite card is 0.2% higher that would make the buy rate 1.8%.
Now many Merchant Account Companies will offer those card present cards at almost cost (let’s say 1.7% – only 10 basis points higher than cost) but they’ll mark all infinite cards by a full 1% higher making the Merchant pay 2.8% on those transactions. Now this could be good or bad for your business, it’ll depend on how many of your customers will pay using an infinite card – which you will not know until you are processing.
The question again is do you really understand how your customers transact with you…? If not you will want to figure it out.
This is where it is important that the Merchants understand how interchange works for their type of business category and/or the way their business will transact. By understanding this they will have a better chance at securing competitive rates because they can then look at the interchange tables and understand what the buy rates are from their type of business. However, as long as the Merchant remains uneducated on how all this merchant processing really works they will continue feel confused, alienated and over charged.
Now there have been some major shifts in the industry that have compounded these issues.
“In 2008, Visa introduced the first significant change to its interchange rate structure in 30 years, which resulted in some transactions attracting a higher interchange rate and others attracting a lower rate. Even with the change in structure and the introduction of the Visa Infinite cards, Visa Canada’s effective interchange rate has remained relatively flat at 1.6%. Interchange rates for Visa Canada are transparent and are available on our Web site.”
What people don’t realize is the change in the interchange structure is not really the problem. The REAL challenge is in educating merchants on how all the fees work. They are really just upset because they don’t understand why they are being charge more for some cards and how all their fees have change so much over the last year. The transparency has not been there and so they feel lied to or even like they have been swindle.
And sending a merchant in fine print 60 days before the change that their rates are going to change is NOT being transparent nor is that any kind of education on how it all works.
I don’t blame Merchants – I’d feel the same way if I were in their shoes. Again, as usual with anything in life – it breaks down to poor communication between the card processors and merchants. Which is fine with me – because it’s this type of poor communication that keeps me in business. 
I take the time to explain and help merchants understand how all these complex merchant MDR’s work and how to structure an application that is competitive and fair to both the merchants and the card processors.
Regardless, of what I think…what do you think…? Let me know in the comments below.
A Great Merchant Account Q & A
April 10, 2009 by Matthew Hunt · Leave a Comment
I was answering a merchant’s question(s) today and realized that a lot of what these two individuals were asking would relate to a lot of other Merchants so, I asked if I could add their questions to my blog and they (very kindly) agreed. I did however change their names to ‘John’ & ‘Jane’ and blocked out their emails, to give privacy.
I hope you too can grab some nuggets from this Q & A. Be sure to let me know in the comment section what you think or what you learned or if there is something you still have a question about.
The Merchant is in regular text and my answers are in BOLD CAPITALS.
———————————————————————————————-
Q & A Email
John & Jane,
Answers to your Q’s are below in CAPITALS.
Also, would you mind if I used your Q’s as a blog post on my website. I will not have any information that says, it’s you, but I feel that you asked very good questions that a lot of merchants in your shoes would want to know and I thought it might make a really nice conversation Q & A piece that could help other Merchants who are looking for the perfect merchant account provider.
I am in my office until 5pm today if you’d like to speak on the phone and then again (Good Friday) tomorrow from 1pm until 5pm. Have a nice Long Weekend!
Regards, Matthew
Thanks for getting this information to us so quickly! When we started taking Visa/MC a few years ago, we started with Moneris because our bank recommeded it. At first, they allowed us to keep our old fashioned hand operated machine and did not charge us in our down months. This quickly changed. Last season, the for the first time, we used a wireless/printing terminal which we leased from them. However, the fee structure kept changing. RATE ADJUSTMENTS ARE BECOMING MORE REGULAR IN CANADA NOW THAT VISA AND MC INTERCHANGE CHANGE THEIR RATES (VISA EVERY APRIL 1ST ADN MC EVERY OCT 1ST). IT’S NOT JUST MONERIS THAT ADJUSTS THEIR RATES. I FULLY UNDERSTAND HOW THESE RATE ADJUSTMENTS ARE FRUSTRATING FOR MERCHANTS AND THE LACK OF COMMUNICATION ABOUT HOW ALL THESE RATES WORK COULD BE COMMUNICATED MUCH, MUCH BETTER WITH MERCHANTS. THERE A TON OF MIS-UNDERSTANDINGS AND EVEN LAWSUITS GOING ON OVER THIS EXACT ISSUE. JUST SEE THIS SITE CALLED ‘STOP STICKING IT TO US‘. Fortunately, we were not on contract, so we cancelled last October and decided that a little research was in order! It’s certainly a confusing world though… I’ve seen quotes of 4 cents a transaction (which I don’t trust by the way) GOOD 4 CENTS IS BELOW THE BUY RATES SO THEY HAVE TO BE MAKING UP FOR SOME WHERE – SO LISTENING TO YOUR GUT IS HERE IS ‘RIGHT’… up to 25 cents a transaction. Hugely diverse set up fees, monthly statement fees… and varying contract lengths. The cost of buying a terminal outright or rent to own are often very far apart. And then there’s the discount percentages! But you know all this!!! YES I DO. AND I UNDERSTAND HOW CONFUSING IT CAN BE.
A couple of things I’m not clear on… are cellular terminals the same as wireless???NO NOT THE SAME. CELLULAR IS COMPLETELY MOBILE JUST LIKE A CELL PHONE, WHERE WIRELESS WORKS LIKE A CORDLESS PHONE ONLY SO GOOD FROM A CERTAIN AMOUNT OF METRES FROM THE PLUGGED IN BASE. I’m feeling that most people will want a receipt printed… do cellular terminals do this too??? YES THEY HAVE A PRINTER BUILT IN. We are quite new at ‘wireless’ piece of this process, given that we’ve been doing it by hand for so long. I know Moneris did not charge us air time… so I’m not sure how their system differs from cellular. IF IT WAS CELLULAR YOU PAID FOR AIR TIME, THEY USUALLY USE BELL MOBILITY AND SOMETIMES THE BILLED IS SENT FROM BELL AND NOT MONERIS. THE SERVICE PROVIDER I USE, USES ROGERS, BUT YOUR ARE BILLED FROM THE SERVICE PROVIDER AND NOT ROGERS.
We would like to be able to process Debit Cards as well as Visa/MC as they were a good percentage of our business last season. THEN YOU WILL WANT TO DO A CELLULAR UNIT, THE VIRTUAL TERMINAL WILL ONLY REALLY ALLOW YOU TO PROCESS CREDIT CARDS ONLY.
By the way… are you a company who provides sale/terminal services, or are you a broker for the best fit for your clients??? BROKER.
Thanks for now… I’m sure I’ll have a bunch more questions as we go. Oh, and we keep being deluged by hustles from Monex! Certainly their numbers are seductive, however my web research on them seems to say… “beware, beware, beware”! I guess it’s the old, “if it sounds too good to be true (or that simple!)… etc.” YES, THIS IS VERY TRUE. I TOO HAVE HEARD A MANY “BEWARE” STORIES ABOUT MONEX (I DON’T USE THEM), BUT DON’T HAVE ANY REAL EXPERIENCE DEALING DIRECTLY WITH THEM EITHER.
PART TWO – EMAIL TWO
John & Jane,
Again I’ll answer your Q’s below in CAPITALS. ALSO, FORGIVE ME IF THERE ARE ANY MIS-SPELLINGS BELOW, I AM A LITTLE TIRED SINCE I DECIDED TO ANSWER THIS LATE.
Have a nice long weekend!
Regards, Matthew Hunt
On Thu, Apr 9, 2009 at 5:54 PM, <@shaw.ca> wrote:
Hi Matthew… again, thanks for your answers!!! Of course you can use my questions as part of your blog! It reassures me when you say I’m asking the right questions! And, it seems to me, that the best way to for you to attract business, is to find a way to make this mish mash of information understandable for us poor, bewildered tiny to small business folks! YOUR EXACTLY RIGHT. MERCHANT ACCOUNTS CAN BE EXTREMELY COMPLEX, BUT I ALSO DON’T WANT THEM TO SCARE YOU INTO NOT HAVING ONE. PLASTIC IS A FACT OF LIFE AND PEOPLE LIKE TO PAY ON THEIR DEBIT AND CREDIT CARDS AND AS BUSINESS OWNERS AND ENTREPRENEURS WE NEED TO CATER TO OUR CLIENTS/CUSTOMERS NEEDS TO HAVE HEALTHY BUSINESSES. For me understanding = safety, and safety = comfort! YES, I AGREE. Anything that will help… go for it. A couple of other things that have been important for me to learn & might be helpful on your blog are these: From my research, I’m discovering although fees may seem to swing wildly from company to company, it often turns out that they are charging them under a different name… for instance, the company that claims they have no airtime fee, are in fact, burying it somewhere else!!! YES THIS IS UNFORTUNATELY TOO OFTEN THE CASE. I AM NOT SURE WHY SOME MERCHANT ACCOUNT COMPANIES THINK THAT MARKETING THEIR SERVICES WITHOUT TOTAL TRANSPARENCY IS HELPING THEM GAIN BUSINESS. MY PERSONAL OPINION IS THEY ARE STUCK IN AN OLD WAY OF SELLING WHICH IS VERY “BOILER ROOM or DEATH OF SALESMAN‘ MENTALITY – THIS WILL ULTIMATELY BE THE DEATH OF THEM BECAUSE WHAT THESE TYPES OF COMPANIES DON’T REALIZE IS THE WORLD IS EXTREMELY SMALL NOW, ESPECIALLY WITH SOCIAL MEDIA AND AS YOU HAVE ALREADY DISCOVERED A LOT OF P.O.’ED MERCHANTS ARE BLOGGING AND TALKING ON FORUMS ABOUT THEIR EXPERIENCES AND WHICH ALL GET INDEXED ON THE SEARCH ENGINES REALLY WELL, JUST SITTING THERE FOR ALL TO READ. I’m also discovering that there is such a thing as a ‘medium qualified’ or ‘non-qualified’ credit card transaction that often incurs a higher discount rate.YES THERE ARE DIFFERENT RATES FOR DIFFERENT TYPES OF:
- CATEGORIES OF BUSINESS
- TYPES OF CARDS PROCESSED
- HOW A TRANSACTION IS TRANSACTED
MOST COMPANIES BREAK THESE TYPES OF TRANSACTIONS INTO A THREE TIERED PRICING, USUALLY KNOWN AS:
- QUALIFIED
- MID QUALIFIED
- NON QUALIFIED
YOU SEE IN CANADA THERE ARE OVER 35 DIFFERENT BUY RATES FROM VISA AND MASTERCARD TO THESE CARD PROCESSOR WHICH IS CALLED INTERCHANGE. (BETTER THAN THE USA WHO HAS OVER 225 LEVELS OF INTERCHANGE) THE INTERCHANGE BUY RATES IS USUALLY POSTED ON EACH OF THEIR WEBSITES BECAUSE EACH COMPANY IS A PUBLIC COMPANY AND SO THEY SHARE WITH THE WORLD WHAT THE BUY RATES ARE.
THE REASON THERE ARE SO MANY DIFFERENT BUY RATES FROM VISA AND MASTERCARD IS DUE TO USUALLY 3 MAIN FACTORS:
1.TYPE OF BUSINESS – SOME BUSINESSES HAVE HIGHER RISK FACTORS WHEN COMES TO PROCESSING CARDS THEN OTHERS, FOR EXAMPLE A BUSINESS IS A CHIROPRACTOR HAS A DIFFERENT RISK FACTOR OVER A GROCERY STORE AND SO THERE ARE DIFFERENT BUY RATES FOR EACH CATEGORY OF BUSINESS.
2. REWARDS CARDS – THOSE SPECIAL CARDS THAT OFFER INCENTIVES FOR CONSUMERS TO SPEND MORE ON THEM TO GAIN POINTS THAT TURN INTO AIR MILES OR WHATEVER, OBVIOUSLY HAVE HIGHER BUY RATES BECAUSE THAT IS HOW THEY PAY FOR THOSE AIR MILES TO THE CONSUMER. NOW THERE ARE STATS THAT SUPPORT THE POINTS CARD USERS SPEND ALMOST TWICE AS MUCH AS NON-POINT CARD USERS AND THUS THIS A REALLY A BENEFIT TO THE MERCHANT. I HOWEVER, THINK THOSE STATS ARE NOT REALLY PURE BECAUSE I THINK POINT COLLECTING CARD USERS DO WHAT ME AND MY WIFE DO, WE PUT EVERYTHING ON OUR POINTS CARD AND PAY ONE BILL AT THE END OF THE MONTH SO WE CAN GET OUR FREE VACATION EVERY YEAR, BUT WE DO NOT SPEND ANY MORE THAN WE WOULD IF POINTS CARDS DIDN’T EXIST. WE ARE JUST BEING SMART ABOUT IT. HOWEVER, THE CREDIT CARD COMPANIES ARE USING THESE STATS TO SUPPORT HIGHER INTERCHANGE RATES, WHICH ULTIMATELY THE MERCHANT PAYS FOR AND EVENTUALLY THE CONSUMER BECAUSE AS THE MERCHANTS COSTS GO UP SO DOES THE PRICING OF PRODUCTS. ANYWAYS THAT IS A WHOLE OTHER STORY AND DISCUSSION.
3. THE THIRD REASON THERE ARE DIFFERENT RATES IS DUE TO HOW A MERCHANT TRANSACTS. OBVIOUSLY A TRANSACTION WHERE THE CARD IS PRESENT AND IS BEING SWIPED ACROSS A TERMINAL AND A HUMAN IS (SUPPOSED TO CHECK SIGNATURES) ETC. IS SAFER AGAINST FRAUD THEN LET’S SAY A NON FACE TO FACE TRANSACTION LIKE AN ONLINE TRANSACTION. SO WHEN THE TRANSACTS ARE NOT FACE TO FACE THEY TYPICALLY HAVE A HIGHER RATE ASSOCIATED WITH THEM.
NOW WHERE IT GETS CONFUSING IS EACH CARD PROCESSING COMPANY WILL TAKE THESE 35 PLUS INTERCHANGE RATES AND ASSEMBLE THEM IN EACH TIER – ONLY EACH COMPANY DOES IT DIFFERENTLY, SO ONE COMPANY’S MID-QUALIFIED TRANSACTIONS IS NOT EQUAL TO ANOTHER COMPANIES MID-QUALIFIED’S. THE SAME WITH NON’S TOO.
DID I LOSE YOU YET?
FOR EXAMPLE,
ONE COMPANY MAY SAY ALL MANUAL KEYED TRANSACTIONS ARE CONSIDERED NON-QUALIFIED (WHICH IS NORMAL) BUT ANOTHER COMPANY MAY HAVE THE SAME BUT HAVE ALL ‘INFINITY CARDS’ BE ALSO CONSIDERED NON-QUALIFIED.
SO IT’S NOT ENOUGH TO JUST FIND OUT WHAT THE “QUALIFIED’S , MID-QUALIFIED’S, AND NON-QUALIFIED’S ARE, YOU ACTUALLY NEED TO DRILL DOWN FURTHER AND FIND OUT WHICH CARDS FALL UNDER EACH UMBRELLA.
THIS IS WHY I ONLY USE A COUPLE OF COMPANIES FOR MOST OF MY CLIENTS. I AM PERSONALLY A FAN OF SIMPLE AND TRANSPARENCY. THE RATE I QUOTED YOU ON THE CELLULAR WAS A BLENDED FLAT RATE AND IT COVERS ANY TYPE OF CARD AND/OR ANY TYPE OF TRANSACTION YOU PROCESS. FOR YOUR BUSINESS MODEL THIS WOULD PROBABLY BE BEST AND TO ALSO SUBMIT AS SEASONAL SO YOU DO NOT GET DINGED WITH MINIMUM PROCESSING FEES DURING THE MONTHS YOU ARE NOT USING IT.
DON’T GET OVERWHELMED, I WILL HELP YOU MAKE THE RIGHT DECISION FOR YOUR BUSINESS REGARDLESS OF WHETHER WE PERSONALLY DO BUSINESS OR NOT.
I’m also learning what rates are negotiable and what rates are not… and why! For instance… if the airtime comes through Rogers… the rate is theirs and is only likely to be negotiable when you are their direct client, as in a personal cell phone. Oh my, there’s so much to learn! YES SOMETIMES RATES ARE NEGOTIABLE, I USUALLY GET MERCHANTS VERY COMPETITIVE RATES RIGHT FROM THE GECKO. IT’S NOT ALWAYS THE BEST PRICE THIS IS BEST, IT’S A COMPETITIVE RATES WITH EXCELLENT SERVICES.
So for now, thank you for all of your help. We are currently sorting out, not only what our options re: POS services are, but how we will be structuring our little business this season. We have pretty much always been ‘a travelling show’ and this is a physically demanding process. My husband/partner is beginning to object!!! So, we are looking at the possibility of doing fewer events and more on-line & wholesale business. We need to decide just how viable that will be.
We’ll be in touch,
I AM HERE IF YOU HAVE ANY MORE QUESTIONS.
MasterCard Fights Back Against Interchange Myths
March 26, 2009 by Matthew Hunt · Leave a Comment
Mastercard Canada released a press release a couple of days ago announcing they have accepted an opportunity to appear before the Senate Standing Committee on Banking, Trade and Commerce in order to discuss the payments industry, as well as to address the significant misinformation being propagated by retail sector lobbyists.
“The many benefits Canadian merchants receive from card acceptance continue to be downplayed,” said Kevin Stanton, President, MasterCard Canada. “I look forward to the opportunity to discuss the important role card payments play in helping maintain a well-functioning financial system in Canada.“
They have even created a full website explaining how interchange works and common myths associated with interchange. The website is called InterChangeTruth.com, this seems to be a offensive approach to dealing with groups like Stop Sticking It To Us coalition, who Mastercard Canada says are fueling myths about how interchange works and affects Merchants and consumers.
A couple of examples they make on their InterChangeTruth.com site are:
Myth: Interchange fees cover the cost of incentive programs, corporate card programs and marketing.
Fact: Interchange fees do compensate card issuers for the variety of activities they undertake in offering credit cards in the market. Incentive programs, card programs and marketing are some of those components but so are security and fraud programs, credit risk, promotional programs executed with retailers to drive business to their stores, and many other initiatives that benefit merchants. Merchants pay a fee to their acquirer for each transaction they process in exchange for the value they get from card payments, including:
- payment guarantee for authorized transactions
- increased sales
- customer satisfaction
- increased safety and reduced pilfering
- ability to serve international customers
- infrastructure, security and innovation investment
- the ability to process e-commerce, phone and catalogue sales
Myth: The current debit system in Canada offers the greatest benefits to consumers and merchants.
Fact: The incumbent Canadian debit system is a privately-held monopoly which for many years had no direct competition in Canada. Therefore it faced no competitive pressures to innovate, improve service, enhance security and fraud systems, or establish attractive pricing for merchants.
Anyway it is an interesting read and the site is only 6 or 7 pages, well worth a read to hear Mastercard’s side.
What are your thoughts as a merchant…? Let us know in the comment section below.
Another article related to this exact topic that you may like is:
Rebuttal to MasterCard Canada Assertions
Did Your Merchant Account Provider Send You This Letter?
March 20, 2009 by Matthew Hunt · Leave a Comment
It is almost April 1st 2009 which means most providers will be adjusting their (MDR’s) Merchant Discount Rates in Canada because Visa adjusts their interchange rates. Look through your statements over the last 2 months and see if you received anything like you saw in the video above. If you did, this is a good sign that you might want to get a cost analysis on your current MDR’s to make sure you are capturing competitive rates for your business. I offer free merchant account comparison quotes or you can do it yourself using our free merchant account calculator.
Would Your Business Survive This Recession Without The Ability to Accept Credit Cards?
March 15, 2009 by Matthew Hunt · Leave a Comment
Aneace Haddad did an interview with MasterCard’s Shawn Miles and there were some interesting points brought up about interchange, recession, credit, merchants, etc. and I thought this interview would be a good read for any of my readers.
Here is the interview – let me know what you think…?
Small Business Owners Lobby to Cut Credit Card Processing Fees
November 12, 2008 by Matthew Hunt · Leave a Comment
This is an article written in New York Times Small Business section and address US merchant account concerns address ever increasing credit card processing fees, but I think it is an article that speaks also to Canadian small business owners.
The article is called: Small-Business Owners Lobby to Cut Credit Card Fees and it is well worth the read. Some of the highlights and quotes from this article that I thought could spark some real conversations among Merchants are:
“In 2007, merchants paid $61.56 billion in electronic payment fees, up from $48.58 billion in 2005, according to the Nilson Report, a payment systems industry newsletter. The report estimated that lenders took in 82.5 percent of those dollars.”
These are the US numbers and assume as being the US northern neighbor that we are most likely not that far behind in our electronic payment fees.
“What merchants are getting for their money is convenience, risk management and guaranteed payment,” said Denise Dunckel, a spokeswoman for Visa Inc.
What do you think of this above statement made by the Visa representative?
“Merchants derive significant gain from the electronic payments system, which has evolved new features such as rewards programs,” said Trish Wexler, spokeswoman for the Electronic Payments Coalition, an advocacy group in Washington. “Ultimately, merchants benefit from rewards programs because people buy more when they use cards. Higher fees for rewards cards are justified because merchants and consumers both share in their expense — but merchants want to pass their fair share to consumers, who’d be hit with higher credit costs and reduced rewards if the merchants succeed.”
I am sure this above statement would get a ton of Merchant’s blood boiling, but I don’t want to speak for merchants – what do you think?
Kenneth J. Clayton, director of card policy for the American Bankers Association in Washington, called the bill “a dramatic proposal by big retailers to use political muscle to lower their costs.” Smaller retailers, he said, “are being put up as poster children to show how challenging it is for them. But behind the scenes are big-box stores that see an opportunity to lower their costs of participating in the electronic payments system that benefits them greatly.”
This is interesting, is this “movement” really just a big conspiracy for greedy large corporations to increase their bottom lines and increase share holder profits?
Just some food for thought. Regardless of the outcome, our current society in Canada and the US are greatly tied to using plastic and credit card processing is not going anywhere. This I am assuming will continue to be an ongoing battle between Merchants, Visa, MasterCard, and the Credit Card Processing Companies.
Canadian Merchant Accounts – Stop Sticking It To Us
October 28, 2008 by Matthew Hunt · Leave a Comment
The word on the street is that more and more Merchants are finding the cost of using credit card processing services to be getting too expensive. This year credit card companies have had two adjustments, one in April by Visa and one recently in Oct 1st, 2008 by MasterCard. These adjustments have created (for most merchants) a three-tiered rate charges. These rates are usually called “Qualified“, “Mid-Qualified“, and “Non-Qualified“. Now each merchant account provider deals with the interchange adjustments differently.
This has caused a real upheaval with many Canadian Merchants and their relative associations that they turn to help them negotiate lower cost merchant account fees. Derek Nighbor, senior vice-president of national affairs for the Toronto-based Retail Council of Canada (RCC) is leading a coalition group called “Stop Sticking It To Us” that is challenging the rate hikes with Canadian Merchant Account services.
The coalition includes 16 groups, including the Canadian Convenience Stores Association, the Canadian Jewellers Association, the Hotel Association of Canada and the British Columbia Restaurant and Foodservices Association.
CFIB president Catherine Swift sent out a letter to their members in Sept 2008 explain how the credit card companies want to enter the debit market up here in Canada, which would could potential drive up costs by 10,000%. An example of how a current transaction fee on debit can be as low as 9 cents, but if we followed the US debit fee structure which is based on a discount rate + plus a transaction fee and now merchants had to pay an average of 0.9% on all debit sales volumes, that same $1000 transaction would now cost the merchant $9, as opposed to today’s current fee of 9 cents. That is a pretty huge increase – could you imagine taxes going up by 1000% over night, or you gas prices…? The world would turn upside down.
These changes are real and are happening. We found another article titled “Merchants miffed by credit card fees” written by Steve Proctor that again is discussing the merchant account hikes with local business owners in Halifax. These hikes are coast to coast across Canada.
One of the biggest problems to these rate hikes is the lack of transparency. Just see what Alan a commenter on Colin’s Blog post titled, “Interchange and how it is the next new problem for consumers in Canada” has to say.
We understand that many merchants are perplexed by these changes and hope to help alleviate the burden of confusion caused by all the different levels of interchange. A good resource many of our clients have found insightful to understanding how Canadian Merchant Accounts work is by reading our FREE guide called The Critical Payment Processing Guide for Canadians.
We think it is very important that merchants ban together to keep rates and fees down. These hikes during any time can be hard to deal with, but during these economic times it can be devastating.
The bottom line is most merchants have just witnessed a 20% hike in their fees with this year’s interchange adjustments. It is essential now to know how your credit card company handles their “Qualified“, “Mid’s“, and “Non-Qualified” transactions. Then you can look at how your business processes transactions and find a company that best suits your individual business needs. The good news is, there are now many other private label merchant account companies in Canada that are looking to compete with the big five banks and now may be a good time to get a comparison quote done to make sure you are securing the most competitive rates.
