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Weekly UpdatesSmall businesses are feeling cornered as major credit card companies and banks are about to inflict a huge cash grab on Canadian merchants.
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New types of premium credit cards have been issued to consumers who spend above a certain threshold and merchants are unaware that the credit card imposes different merchant fees once it has been deemed "high spend."
"I have never heard of this," Greg Taylor owner of Greg Taylor Jewelery Appraiser and Photography.
"There has been no official notice of this and I can tell you those fees are annoying."
Taylor has been in business for 35 years, most of his working life. He is frustrated that big banks and credit card companies have their hand in his pocket each time he turns around.
"It is getting harder and harder to make money," he says, particularly because of goods being sold on the Internet.
"I'll tell you what is going to happen," he suggests. "It will be a net loss for the government because the harder you make it for people to do business within a structure, the more people will refuse it and revert back to a cash-based society."
But credit card companies and banks are not stopping there.
United States card companies are now looking to enter into the debit card business in Canada which has, up until now, been managed by Interac Inc., Canada's organization that runs network payment systems including automated banking and debit transaction on a not-for-profit basis.
The association is in discussion with the Competition Bureau to "restructure" their organization "to take on these credit card companies," says Caroline Hubberstey, director of public affairs with the association.
It has been reported that Interac is likely going to move from a not-for-profit to a for-profit entity as various options including IPO and private equity options are being considered, Hubberstey says.
Interac charges a flat feeregardless of the debt transaction. However, the credit card companies would likely move to a fee based on the percentage of the debit transaction size, thus massively increasing the fees merchants would pay, says Catherine Swift, president of Canadian Federation of Independent Businesses.
Visa and MasterCard have both gone public and now emphasis is on shareholder value, Swift says. As well, they and banks must try to make up for the "stupid investments" that have gone awry.
This may be only the tip of the iceberg.
"There is a lot more that has yet to be revealed. This is very bad timing," she says, considering the downturn in the economy and the election craze.
Swift says Visa and MasterCard have controlled the market for years and are unregulated, unlike Interac who was taken to task by the Competition Bureau in the 1990s when they accused them of abusing their power in the payments sector, according to a report.
By KELLY LOUISEIZE
Northern Ontario Business
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