Reduced Credit Card Fees To Save $400 Million for Canadian Restaurants

Canada’s two largest credit card networks Visa and Mastercard announced a reduction in transaction fees for merchants Tuesday, committing to an average effective rate of 1.50% for the next five years. The reduction will be in place by April 2015, and is expected to save almost $400 Million annually for merchants across Canada.

For restaurant owners, this announcement is a welcome relief from regular cost increases having endured years of regular rate hikes.

"Eighty per cent of our members have blamed credit card fees for significantly impacting their bottom line. In some cases, the card issuer makes as much profit on a meal as the restaurateur." said Garth Whyte, President and CEO of Restaurants Canada. “This voluntary move to lower rates is a positive step for restaurateurs who pay among the highest credit card transaction fees in the world.”

Current interchange rates vary from 1.75% for regular cards to up to 2.70% for some premium cards, which have been growing in popularity as the additional perks and rewards programs entice customers. Total fees paid to card processors in Canada exceed $5 Billion a year.

However, new developments in the payments processing industry point to a brighter future for merchants. South of the border, efforts by new entrants like LevelUp have contributed to a continued reduction in transaction rates. The mobile payments and rewards platform even subsidized merchant fees for over a year after announcing their "Interchange Zero Mission", charging clients a flat 2% rate and absorbing the loss until April of this year, when it successfully attained its goal and made a further cut to 1.95%.

One of the many factors that make mobile payment attractive is the possibility of directly integrating the payment apps with a user’s bank account, eliminating cards from overall the payments process. As new payment solutions continue to enter the market, it may not be a too distant future when merchants will be able to deal directly with the customer by cutting out the middle-man altogether.

→ If you’re excited about what the new rate means to your bottom line, check out what a reliable schedule can do to boost your peace of mind!