Small businesses are getting a break on credit card fees starting next year

Many Canadian small businesses will face lower fees on their credit card transactions after a deal struck between the government, Visa and Mastercard goes into effect.

Many Canadian small businesses could soon save hundreds of dollars a year on costly credit card fees, thanks to a deal reached between Ottawa, Visa and Mastercard.

The deal will see qualifying small businesses pay less on credit card transactions by lowering interchange fees paid to banks.

Ottawa expects 90 per cent of Canadian small businesses will qualify for the lower fees, which would save companies an estimated $1 billion over five years in total.

The finalized arrangement was announced by Finance Minister Chrystia Freeland on Thursday in Brampton, Ont. It was first teased in the 2023 federal budget at the end of March.

On Thursday, Freeland claimed cutting down on costly interchange fees could benefit both small businesses and their customers.

“Canadians pay some of the highest interchange fees in the world, and that lowers the profit margins for small businesses and drives up prices for Canadians,” she said.

Businesses that process less than $300,000 in Visa payments and less than $175,000 for Mastercard over the course of the year will qualify for the relief, which would see interchange fees lowered by up to 27 per cent from the current weighted averages.

In an example prepared by Finance Canada, a sporting goods store with $300,000 in annual credit card transactions split between Visa and Mastercard would typically pay around $4,000 per year on interchange fees.