Earlier this week, the Government of Canada announced it is delivering on the Budget 2023 commitment to lower credit card transaction fees for small businesses by finalizing new agreements with Visa and Mastercard, while also protecting reward points for Canadian consumers offered by Canada’s large banks.
Small businesses pay fees to process credit card transactions, with the largest component being the interchange fee paid to credit card-issuing financial institutions, such as banks. These new agreements will help more than 90 per cent of credit card-accepting businesses in Canada qualify for lower rates and see their interchange fees reduced by up to 27 per cent from the existing weighted average rate. These reductions are expected to save eligible Canadian small businesses about $1 billion over five years.
Small businesses will qualify with each credit card network individually. Businesses with up to $300,000 in annual Visa sales will qualify for lower interchange rates from Visa, and those with below $175,000 in annual Mastercard sales will now qualify for lower fees from Mastercard.
The reduction of credit card rates has been a longstanding issue for organizations such as The Ontario Restaurant Hotel & Motel Association (ORHMA), a founding member of the Business Merchant Coalition. ORHMA has prioritized advocating this issue, which TIAO has supported in our lobbying and letters to government officials.
The new rates will come into effect in the Fall of 2024 to allow time to complete the required system updates.