Cookies policy

In order to provide you with the best online experience this website uses cookies.
By using our website, you agree to our use of cookies. Learn more.

Saturday,  May 25, 2024 1:41 PM 

Credit card fee reductions met with mixed reactions

  • Air
  •   11-12-2014  10:10 am

Credit card fee reductions met with mixed reactions

A long-awaited reduction in credit card ‘interchange fees’ for Canadian businesses has been met with mixed reaction by businesses, including those in the travel industry.

Last week, Visa and MasterCard announced long-rumoured reductions in fees charged to Canadian merchants accepting credit payments, agreeing to cut those charges to an average of 1.5 per cent for the next five years. Known as interchange fees, such charges for businesses accepting credit can vary, with cards that offer increased consumer incentives, such as travel rewards, costing businesses more per use. The reduction is set to be implemented by April 2015 at the latest.

According to the Canadian Federation of Independent Business, those fees are adding up to between $5 billion and $7 billion in extra charges for consumers, to whom businesses pass along the expense. In a press release, the CFIB lauded the measures undertaken by both the credit card companies and the federal government in cutting the charges, stating that while the fee reduction itself is relatively small, the move may signal the end of incremental increases to the fees that have taken place in recent years.

While the Association of Canadian Travel Agencies welcomed the announcement as a step in curbing the fees that are “eroding the profitability of many small and independent businesses, including travel agencies,” ACTA also cautioned that “the move is not far enough and will have limited impact on rising fees.” The ACTA release also noted that the Small Business Matters Coalition (of which ACTA is a member) has asked the federal government “to not pass on the credit card fees to the consumer but rather, that the government make the charges more fair, especially in comparison to other jurisdictions where regulatory intervention has proven successful.”

Jeff Element, President of The Travel Corporation, told PAX that while the fee reduction is welcome news, he hopes to see the establishment of a fee cap in the future, curtailing the climbing costs associated with those premium credit cards offering holders loyalty benefits, such as points for air travel.

“We are pleased to see credit card companies reducing their fees in an effort to support their merchant clients,” Element said, “but the trend for many years has been for credit card companies to have their customers switch to premium credit cards that offer significant benefits or cash back – this is very common for the travel industry with credit cards that allow users to accumulate air mileage or travel points. However, these cards come with higher fees ranging from two per cent to 3.5+ per cent, so a cap on credit card fees would be of benefit especially to us.”

Christian Wolters, Deputy General Manager of Intrepid Group Canada, said that while “any reduction in these fees is a positive,” time will tell what kind of benefits will be reaped by the travel industry.

“It is difficult to speculate on any potential savings,” said Wolters, explaining that Intrepid’s pricing structure is managed at a global level. “But if there are, we may look into feeding those back into the Intrepid Foundation to help support our community development projects around the world. We hope credit card companies will not change the terms of speciality cards as it has been rumoured. Some suggest travel rewards cards for example may not offer the same level of benefits, which I know many eager travellers will not be fond of.”