A note on credit card surcharge fees.

Merchants in Canada (except Quebec) may now add a surcharge fee to credit card transactions – the result of a recent class action settlement with Visa and Mastercard.

Credit card companies charge merchants ‘interchange rates’ – a fee shared between credit card companies, payment processors, and banks. The rates vary from roughly 1% for basic cards, and up to 3% for rewards cards that offer cash back or loyalty cards. The fees became a larger issue for businesses during the pandemic, when cash transactions fell and more consumers shopped online. As digital payments increased, so did the fees paid by merchants.

The class action suit’s settlement doesn’t change the fees, but it does allow businesses to apply for refunds on some of the fees paid since 2021 – and gives merchants the power to pass the credit card fees on to their customers. While the surcharge application is left to the merchant’s discretion, there are rules for applying and notifying customers and credit card companies of any pending changes.

Polls indicate that most businesses don’t plan to pass the surcharge on to customers. A survey conducted by the Canadian Federation of Independent Business found that only 19% of member respondents intended to surcharge their customers, although that percentage was higher among B2B businesses; only 12% of retailers stated an intention to surcharge. However, roughly 35% of CFIB’s respondents would encourage customers to use other forms of payment, and 28% planned to increase their prices to absorb credit card fees.

Business associations have been calling on Canada’s federal government to do something to reduce interchange fees for quite some time. The current Liberal government expressed a commitment to lower the fees in the 2019 election and addressed the issue in the 2021 budget, although concrete action has yet to be taken.

Most business groups and operators don’t see charging the customer as a realistic solution. As per Canadian Grocer, “Charging customers more money at the check-out — especially when most Canadian consumers are taking a financial hit from the meteoric rise in food prices — doesn’t seem like a good business decision.” The Canadian Federation of Independent Grocers recommends its members not introduce surcharges; as per CFIG senior VP Gary Sands, “Punishing your customer is not the way to resolve this issue.”

The CFIB’s website has a great deal of information available to help businesses address this issue, and we recommend monitoring the Government of Canada’s own site for updates and/or changes.


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