MasterCard to reduce credit card fees for CFIB member businesses

MasterCard and the Canadian Federation of Independent Business have struck a deal to reduce credit card interchange fee rates for CFIB's 109,000 member businesses.

MasterCard's interchange fees — per-purchase fees paid by retailers to the credit card companies that process their transactions — will be reduced from 1.44 per cent to 1.26 per cent for regular credit cards, effective April 3, a decrease of 12.5 per cent.

Interchange fee rates for MasterCard's premium cards, which are generally higher, will fall by as much as 22 per cent, according to CFIB.

"This has been a nearly 10-year battle with the credit card companies over processing fees," said CFIB president Daniel Kelly. "It was at one point the only thing that small businesses wanted to talk to me about, was the fact that their fees were going up so much."

Agreement follows deal with federal government

CFIB's deal with MasterCard to reduce interchange fees comes on the heels of a reduction for all Canadian retailers in 2015, when Visa and MasterCard signed a five-year deal with the federal government to limit transaction fees to an average rate of 1.5 per cent across all cards. This deal, said CFIB's Kelly, will help MasterCard meet that commitment.

Still, he gives MasterCard credit for easing fees on the small- and medium-sized businesses CFIB represents.

"It would have been just as easy, probably easier, to do it by giving lower rates to a handful of big guys to keep your rates down as opposed to hundreds of thousands of small guys," said Kelly.

CFIB is also seeking similar deals with Visa and American Express, he said.

Interchange fees still high in Canada

Although CFIB's deal with MasterCard is good for members of the federation, it doesn't get to the root of the problem faced by Canadian businesses, said Karl Littler, vice-president of public affairs with the Retail Council of Canada.

"The point remains that these are still vastly too high in global terms, so it doesn't dissuade us from our view that whether it be MasterCard or Visa, these fees need to come down much more precipitously," said Littler.

Credit card interchange fee rates are considerably higher in Canada and the U.S. than in most comparable countries around the world, research from the Kansas City Federal Reserve shows. In 2015, the European Union capped credit card interchange fees at 0.3 per cent of the value of a transaction.

In 2016, the federal Department of Finance announced it was reviewing interchange fees charged by credit card companies to ensure "adequate competition and transparency for Canadian businesses and consumers when it comes to the fees they incur when using credit cards."

Some big retailers, which generally enjoy lower credit card interchange fee rates, have also been pushing for a better deal with credit card companies.

In January, Walmart ended a six-month dispute with Visa over interchange fees after banning Visa cards at certain Canadian Walmart locations. The terms of that deal were not disclosed.