There's been a lot of business buzz lately about the lowering of interchange fees charged to retailers by Canada's two biggest credit card companies, Visa and MasterCard. But is it news for the average Canadian credit card consumer? Chances are, yes, in the long run as it could affect how much you pay for the stuff you buy, and potentially change the terms of your credit card.
Credit Card Interchange Fees: What Are They Exactly
Every time you swipe or tap your credit card to make a purchase, the retailer is charged an interchange fee. This fee, which varies depending on the card you've got, can range from about 1.5 per cent to three or more per cent of the total purchase.
Why Would Visa and MasterCard Lower Their Credit Card Interchange Fees?
The Government of Canada has had their eye on interchange fees for some time. "As a result of the voluntary proposals, there is no need for the Government to regulate the interchange rates set by the credit card networks," Federal Finance Minister Joe Oliver said in a statement.
The lower interchange fees will come into effect no later than April 2015, and will be frozen for a period of 5 years.
Will This Impact The Typical Credit Card Consumer?
It should. The CBC has reported that the Canadian Federation of Independent Business estimates that the "fees are increasing the costs of goods for consumers in Canada by between $5 billion and $7 billion a year" suggesting that interchange fees are built into everything we buy. In theory then, consumers should benefit from lower prices when the interchange fees themselves decrease. Mr. Oliver added in his statement, "In total, the two commitments [by Visa and MasterCard] represent a reduction in credit card fees of approximately 10%. These commitments represent a meaningful long-term reduction in costs for merchants that should ultimately result in lower prices for consumers."
Will The Interchange Fee Affect My Credit Card?
Whether or not the new lower interchange fees affect your credit card is up for debate. If fees are being reduced, then somewhere along the line, someone is getting less money. This could mean a change in the terms of your credit card, especially rewards credit cards. In the coming months, it's important that consumers watch for updates from their credit card provider because it wouldn't be out of the realm of possibility that rewards or fee structures change.
The good news is that credit card providers are required to give 30 days of written notice when changing a cardholder agreement. So don't throw away all those inserts stuffed into your credit card bill when you get it in the mail; you'll want to give them a good read first. And, if you're not happy with what you see, remember you have options. Other lenders will try to get your business and woo you, so don't be shy about comparing credit cards and switching to one that's a better fit if your card's new terms no longer match your needs or spending habits.
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