Paying with a credit card? Expect to see a fee when you shop under new rules that start now

With record-high inflation, Canadian shoppers are well aware that the cost of just about everything is going up.

But they can soon expect to see a new demand for their dollars when they shop, because starting Thursday, retailers and other businesses will be allowed to charge them a fee every time they swipe their credit card once notice is provided to card companies.

While consumers love the convenience and rewards of paying with credit cards, they have raised the ire of retailers for years because as part of the original card agreements, stores had to give a percentage of every sale to the card providers for making the transaction happen. The fee can range from fractions of a per cent to more than two per cent for some premium cards.

As part of their card agreement, merchants were forbidden from passing on that cost to consumers. But that all changed earlier this year, when Visa, MasterCard and other card providers settled a long-running lawsuit on the issue in Canada — agreeing to rebate merchants $188 million for what are known as interchange fees that merchants were charged in the past decade.

"Credit cards are one of the most expensive means of payment for merchants," said Luciana Brasil, a partner at Vancouver-based law firm Branch MacMaster LLP, which worked on the class-action lawsuit that led to the settlement.

Customers love paying with cards because "they get their points, their rebates, their benefits," she said, "but they rarely ask themselves who's paying for that.

"In reality, the more benefits those credit cards give the consumer, the more expensive they are for the merchant to accept them."

Part of the deal Brasil ironed out with credit card companies allows merchants to pass on that cost to consumers directly in the form of a surcharge — which means consumers should get used to seeing it soon.

The new rules won't be a free-for-all, as starting Thursday, merchants must give card providers 30 days' notice of their intent to start charging a fee. They must also make it clear to customers at the time of payment that there's a surcharge, and it can't be more than they pay themselves. Finally, the surcharge will be capped at 2.4 per cent.

Telecom provider Telus has already warned its customers that they'll have to pay a surcharge of about $2 per customer on average starting this month, if they pay their bill with a credit card. And more and more businesses are likely to do the same soon.

In a poll of nearly 4,000 members of  the Canadian Federation of Independent Business (CFIB) conducted in early September, the group found that about one in five small businesses plan to levy the fee, and more than a quarter say they will if their competitors do.

More than one-third say they plan to use other means to try to convince customers to pay using another method, and more than a quarter say they plan to simply increase their prices to cover the cost of credit card payments.

Most small businesses say they don't want to charge the fee, but with a card provider taking $2 of a $100 sale, they have little option but to levy the surcharge, even if it costs them customers.

"Most smaller merchants are still on the fence or don't plan to surcharge as they don't want to risk losing customers," Corinne Pohlmann, CFIB's senior vice-president of national affairs and partnerships, said. "But surcharging gives them the ability to offset some of their costs and be transparent with their customers about the fees they pay."