Merchants will soon have the ability to surcharge on credit card transactions to offset credit card processing fees, and nearly one in five (19 per cent) small businesses are considering it, according to a new survey released Wednesday by the Canadian Federation of Independent Business (CFIB).
As a result of a recent class action settlement, Visa and Mastercard will give small businesses the power to add a surcharge on some credit card transactions starting October 6, 2022, to offset their merchant fees. Due to consumer protection laws in Quebec, this option will not be available in that province, said the national organization.
“Most smaller merchants are still on the fence or don’t plan to surcharge as they don’t want to risk losing customers. However, it’s important for them to know they will have this option,” said Corinne Pohlmann, Senior Vice-President of National Affairs at CFIB. “Small businesses have long been dealing with expensive credit card processing fees and trying to find ways to absorb the cost of accepting premium cards without the ability to surcharge or refuse those cards. Surcharging gives them the ability to offset some of their costs and be transparent with their customers about the fees they pay.”
The CFIB is Canada’s largest association of small and medium-sized businesses with 95,000 members across every industry and region.
The CFIB said its survey also found that 26 per cent of its members said they will surchage if their competitors or suppliers do. More than one-third (40 per cent) of small firms said they are not sure yet if they will surcharge, while 15 per cent said they don’t intend to do it.
“These data reveal the frustration so many business owners feel about the high cost of credit card processing, which can eat about 1.5 to 2.5 per cent of every sale,” said CFIB president Dan Kelly.
“The power to surcharge will allow merchants to address their rising operating costs, push back against future credit card fee hikes and keep their prices competitive,. With mounting pressures small businesses are facing due to inflation and government-imposed costs, surcharging is another way to reduce their cost burden.”
Merchants can now apply to surcharge by registering their plans with their credit card processor and Mastercard (Visa requires registration with the processor only). Once they have registered their intent to surcharge, merchants must then wait 30 days before they can start to apply a surcharge on Visa and Mastercard transactions, explained the CFIB.
(Mario Toneguzzi is a veteran of the media industry for more than 40 years and named in 2021 a Top Ten Business Journalist in the world and only Canadian)
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