Roughly 20% of businesses looking to surcharge on credit cards

The results of a recent class action settlement, Visa and Mastercard have given small businesses the ability to add a surcharge on credit card transactions to offset credit card processing fees.

A recent survey of its membership by the Canadian Federation of Independent Business (CFIB) indicates nearly one in five (19%) of small businesses are considering doing so.

“Most smaller merchants are still on the fence or don’t plan to surcharge as they don’t want to risk losing customers. However, it’s important for them to know they will have this option,” said Senior Vice-President of National Affairs CFIB Corinne Pohlmann in a media release. “Small businesses have long been dealing with expensive credit card processing fees and trying to find ways to absorb the cost of accepting premium cards without the ability to surcharge or refuse those cards. Surcharging gives them the ability to offset some of their costs and be transparent with their customers about the fees they pay.”

While 19 per cent indicated they would surcharge, an additional 26 per cent said they would do so if their competitors or suppliers do. Another 40 per cent replied to the survey they were not sure what action they would take. Only 15 per cent stated they would not surcharge.

Most likey to surcharge were businesses that sell to other businesses, including construction, manufacturing and finance/insurance. Businesses that serve consumers directly were less likely to say they would surcharge. Nineteen per cent of hospitality industry respondents indicated a plan to surcharge, while 17 per cent of personal services, and 12 per cent of retailers intend to surcharge.

“These data reveal the frustration so many business owners feel about the high cost of credit card processing, which can eat about 1.5 to 2.5% of every sale,” said CFIB president Dan Kelly.

The business lobby group continues to call on the federal government to further reduce ongoing credit card processing fees for small businesses. Currently, Quebec does not have the ability to surcharge, and CFIB believes they should also have the right to surcharge to offset their credit card fees.

“The power to surcharge will allow merchants to address their rising operating costs, push back against future credit card fee hikes and keep their prices competitive,” Kelly said. “With mounting pressures small businesses are facing due to inflation and government-imposed costs, surcharging is another way to reduce their cost burden.”

Merchants wishing to surcharge register their plans with their credit card processor and Mastercard (Visa requires registration with the processor only). Once registering the intent to surcharge, merchants must then wait 30 days before they can start to apply a surcharge on Visa and Mastercard transactions.

“All payment processors should be ready to support merchants interested in surcharging as soon as possible. If the processors aren’t ready, CFIB is urging them to find a solution for merchants who wish to start surcharging,” Pohlmann added.

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