How to avoid new credit card processing fees

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Q: I heard in the news that anyone who accepts credit cards as a payment method may be charged additional fees. I was hoping that wouldn’t be the case as the cost of living is already very high. However, my mobile operator has informed me that there will be a small charge if I pay with my Visa card. Right now my monthly bill is less than $2, but if everyone charges me a little it will add up quickly. what can i do? ~Roger

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A: Merchants are charged a fee when a customer pays with a credit card. Credit card processing fees are called interchange fees and are a percentage of the purchase amount. The amount of the fee also depends on the type of card used. The more cardholder benefits, the higher the merchant fees.

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In the past, retailers were forced to bear these fees as a cost of doing business and were prohibited from passing them on to their customers. Earlier this year, changes were made to the contract between the retailer and his Visa, MasterCard, and other credit card companies. As of this fall, businesses can now pass these charges on to their customers.

Where do credit card processing fees come from?

If these extra charges sound like another cash grab, it helps to understand where credit card processing fees come from. Canadians love loyalty cards. Whether it’s cashback, points on merchandise, or travel rewards, Canadian consumers are avid collectors. But as you work towards your next “free” trip, rebate, or appliance, have you ever thought about how your “free” rewards will be funded?

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Depending on the reward, the costs are fully or partially offset by transaction processing fees. And no free lunch, whether you pay extra fees on your bill to your favorite retailer or the retailer raises the price slightly to avoid passing the fee on to the customer.

Restrictions on new surcharges

As with fees and surcharges, it’s useful to know what you’re being charged and what you’re being charged for. Rules for surcharges that is. As part of the rule change regarding exchange fees, merchants will be required to give consumers at least 30 days’ notice of introducing fees to collect processing fees. The surcharge cannot exceed what the retailer pays and overall he is limited to 2.4%. Merchants should also make it clear to their customers at the time of payment that a Cost Recovery Fee has been charged.

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Money management tips to minimize extra charges

In the short term, most consumers are unlikely to reduce their rates as retailers decide if and/or how they pass on the additional charges to their customers. Relies on credit cards for daily expensesThe cost of living is at a record high. Credit card usage is on the rise. Online shopping is safer and more secure than other payment methods for those who pay with credit cards.The pandemic has reduced the use of cash. Nearly half of Canadians struggle to make ends meet and lack the ability to manage unexpected expenses from their savings, according to an ongoing consumer trends survey.

You can rely on your credit card to make ends meet, but withdraw your hand and Assess your spending habits This time of year when everyone is accustomed to fees. Whenever possible, shop at retailers that don’t pass on extra charges to customers right away. Choose a merchant that implements a small flat fee option that allows you to share fees with your customers instead of passing all fees on to your customers.

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Not all retailers implement additional charges for credit card processing. It depends on what your competitors are doing, how loyal you believe your customers are, and what industry you’re in. Stores that sell essentials like groceries, alcohol and fuel depend on what consumers sell.

recurring billing or subscription, especially those with locked-in contracts, may: Most consumers are more comfortable allowing an entity to charge their credit card than allowing them to access their bank account.Consider setting the another bank account Used for payment only. It’s a killer budget strategy and can even save you money on new rates. Plus, debit cards, even those with the credit card logo, use the Interac system. This is a much cheaper option for merchants and is not part of the new surcharge and interchange fee system.

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Due to the need to update computer systems to account for various fees, the need for staff to become familiar with the changes, and the appropriate 30 day notice required, it may take some time before processing fees are reflected on the front lines. This will take some time.

Take time to review your budget during this transition period. If you’re so close to your limit that you don’t want to admit it, contact your representative. Non-profit credit agencies in your areathey can help you Budget overview Shows you how to stay a month or two ahead. This gives you peace of mind and allows you to pay with debit or cash instead of credit to avoid all extra charges.

While you’re reviewing your finances, also review your credit card benefits. Are you taking advantage of everything they offer? If you only get 1% cashback on most purchases, but you have to pay extra for more, the card’s main perks won’t do you any good. Contact your credit card provider to switch to a card without rewards. Look for cards with no annual fee and minimal rewards. They charge the lowest processing fees. Also check out your favorite retailers. With credit card programs becoming more expensive, many people have free loyalty programs that are worth taking advantage of.

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FCAC Credit Card Comparison Tool

Final result of credit card spending in case of additional charges

Credit, and therefore debt, has become all too common a part of Canadian culture. Collect as many perks as you can and change your spending habits to avoid paying new credit card processing fees instead of racking up debt in the name of points. Only time will tell if spending more prudently is a silver lining for this change in how processing fees are collected.

Related reading:

4 Ways To Decide If A Rewards Credit Card Is Worth It For You

Credit card mistakes that can hurt your credit rating

Do credit card limits help or hurt your finances?

Scott Hannah is president of the nonprofit Credit Counseling Society. For more information on managing your money and debt, please contact Scott. e-mailcheck nomoredebts.org Or call us at 1-888-527-8999.