Lower credit card transaction fees coming to small business as Canadian agreement reached | Canada (2024)

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Lower credit card transaction fees coming to small business as Canadian agreement reached | Canada? ›

These new agreements will help more than 90% of credit card–accepting businesses in Canada qualify for lower rates and see their interchange fees reduced by up to 27% from the existing weighted average rate. These reductions are expected to save eligible Canadian small businesses about $1 billion over five years.

Prior to the deal announced this week, the average interchange on a Visa card in Canada was 1.4 per cent. As per the terms of the new agreement, the annual weighted average fee for in-store transactions will be reduced to 0.95 per cent, while the same fee for online transactions will be reduced by 10 basis points.

In short, yes. Merchants who decide to pass interchange fees on to their customers have to give them 30 days notice. The fee itself is also capped at 2.4% and merchants have to clearly let their customers know at the time of purchase that the fee is being charged.

Most Canadian credit and debit cards charge a foreign transaction fee between 2.5-3.5% on U.S. purchases.

You can deduct management and administration fees, including bank charges, incurred to operate your business. Bank charges include those for processing payments.

The good news is that while the legality of surcharges has been murky in the past, as of 2023, credit card surcharges are now legal in all U.S. states except for Connecticut and Massachusetts. (Credit card surcharges are also prohibited in Puerto Rico, just in case you were wondering.)

If you're going to use a credit card in Canada, Visa and Mastercard are your surest bets. You should also make sure your card has no foreign transaction fees so you don't pay extra. With such a card on your side, you'll be able to save up to 3% on all purchases processed abroad.

Businesses apply credit card surcharges to offset the costs associated with processing credit card transactions. When customers pay with a credit card, businesses incur fees from their bank or payment processor. These fees can include a percentage of the transaction amount plus a fixed charge per transaction.

On average, Canadian merchants have been paying 1.5% on each transaction, though different kinds of credit cards are charged different merchant discount rates; a premium credit card offering rewards, such as cash back, may cost as much as 3%.

How to avoid foreign transaction fees in Canada? ›

The number one loophole is tax deferral. The corporate income tax rate is 15.5% (that is the combined provincial and federal rate). However, your personal rate can reach as high as 46.4%. That's a difference of almost 31 percentage points.

As a merchant, you have the option of adding a surcharge to a credit card transaction (except in Quebec). Some payment card network operators (PCNOs) forbid surcharging for prepaid cards. not applying a surcharge that is: higher than your actual cost to accept the credit card.

Credit card fees are not deductible for individuals and are deductible for businesses. Businesses can deduct all credit card fees as well as finance charges. Businesses are eligible to deduct credit or debit card processing fees associated with paying taxes, but individuals are not.

Typical Costs for Credit Card Processing

The monthly fee may range from $13 CAD to $27 CAD. The per-transaction fee can range from 0.40% plus $0.13 CAD to 2.39% plus $0.25 CAD.

Businesses apply credit card surcharges to offset the costs associated with processing credit card transactions. When customers pay with a credit card, businesses incur fees from their bank or payment processor. These fees can include a percentage of the transaction amount plus a fixed charge per transaction.

Total credit and debit card swipe fees – which have risen 50% since the pandemic and reached a record $172.05 billion in 2022 – are most merchants' highest operating cost after labor.

In most cases, credit card processing fees will run between 1.5% to 4% of the total value of a transaction. A $1,000 transaction, therefore, could have fees ranging from $15 up to $40.