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Ellen Roseman: Credit card surcharge battle will ultimately hurt consumers

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Ellen Roseman is a business writer at the Toronto Star.

(Listen to the audio version of this column.)

 
Recently, I went for dinner at a Chinese restaurant. The owner refused to accept my credit card, even though he'd taken credit cards in the past.
 
Merchants pay hefty surcharges when they accept credit cards for payment. As consumers, we don't know about these surcharges because they're buried in the prices we pay, whether we use credit cards or not.
 
Enter the federal competition bureau, which is seeking a prohibition order against two worldwide credit card issuers, Visa and MasterCard. It estimates that hidden fees cost retailers and consumers $5 billion a year.
 
Canada has among the highest credit card fees in the world. Merchants pay 1.5 to 3 per cent of each purchase. A $400 set of snow tires, for example, can cost them up to $12 in credit card fees.
 
Meanwhile, the same $400 set of snow tires costs merchants only 12 cents in debit card fees. That's because Canada's debit card system is run by Interac, a non-profit cooperative of financial institutions
 
Visa and MasterCard have started pushing premium cards onto Canadians, hoping to grab market share from American Express. Consumers use them without being aware of the escalating surcharges for merchants.
 
Melanie Aitken, Canada's competition watchdog, hopes to strike down the rules that prevent merchants from passing the surcharges along to customers. Why not let stores charge you extra for using a higher-cost card?
 
Visa and MasterCard both say that Amex should be targeted as well. But the competition bureau replies that Visa and MasterCard control 90 per cent of the Canadian credit card market, accounting for $240 billion in purchases.
 
The fate of credit card surcharges is in the hands of the competition tribunal, which could take a year to decide on the case.
 
So, here's the key issue. Will consumers benefit if the federal government allows merchants to add surcharges for credit cards?
 
No, they won't benefit, says the Consumers Association of Canada. In Australia, where merchants can add surcharges, the airline Qantas charges as much as $30 extra per ticket for customers using credit cards.
 
Yes, they will benefit, says the competition bureau. Canada's retailers operate in a highly competitive market, where it's difficult to make surcharges stick.
 
If merchants keep facing higher credit card costs, many will be forced to raise their prices or stop accepting credit cards altogether.
 
Either way, consumers will get hurt.

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