# Competition Tribunal throws out case against Visa, MasterCard



## Echo (Apr 1, 2011)

Good news for rewards cards fans - http://www.theglobeandmail.com/report-on-business/credit-card/article13359707/

I know there's a lot of people who feel the plight of small business owners, but I don't really see how consumers would benefit if retailers were allowed to impose surcharges or refuse certain cards.


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## Jungle (Feb 17, 2010)

Yea I don't see that being the solution to all this. Maybe they need to just put a cap on the surcharge for all cards. 
Because the premium cards charging retailers almost 3% does seem to be a little excessive. Just like the PE on V is 86.. lol


Either the business or customer pays. Business will have to pass down to customer.


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## NorthKC (Apr 1, 2013)

Living in a small city with lots of local businesses, these charges add up fast. I do recognize that there is a cost but definitely put a cap on the charge. I have done the books for this one business that has a lot of premium charges of 4%! Ouch!


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## Jungle (Feb 17, 2010)

Is it the AMEX that charges 4%? I've heard they are really high.


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## NorthKC (Apr 1, 2013)

Depends on AMEX (charges between 4 and 6% hence why many businesses don't accept AMEX outside of the metro areas not to mention additional fees on top of that) but I have seen Visa Gold and Platinum charges of 3-5%.


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## Retired Peasant (Apr 22, 2013)

Jungle said:


> Either the business or customer pays. Business will have to pass down to customer.


Businesses just raise the price of everything to cover these costs. That's unfair to people using cheaper cards or cash. We might see some offer a %off if you're paying cash. I believe that's how the Canadian Tire Money started - offering the 'money' to people that paid cash.


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## My Own Advisor (Sep 24, 2012)

The business will have to pass the costs down to customer. As a customer, if you don't like the price, you move on.

@Retired, I believe you are right about CTC $$.


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## ChrisR (Jul 13, 2009)

What doesn't make any sense is why the retailer is the one left on the hook paying for the premium card in the first place.

Of all of the the parties involved, the retailer seems to be the only one that has nothing to gain by people switching to premium cards.

The credit card user benefits because they get to collect rewards.
The credit card issuer benefits because it lets them attract customers.
The reward company benefits because it promotes the use of the reward program (ex. Air miles, Aeroplan, an in-house reward plan etc)

What does the retailer gain (compared to the use of a regular low cost credit card)?

It just kind of seems like a no-brainer that Visa and MC shouldn't be able to pass the costs to the retailer UNLESS they can demonstrate a particular benefit that the retailer is paying for.


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## HaroldCrump (Jun 10, 2009)

ChrisR said:


> What doesn't make any sense is why the retailer is the one left on the hook paying for the premium card in the first place.


The retailer is not - all the consumers are.
This cost gets factored into their operating costs and thus gets fractionally distributed across the price of all goods and services sold by the retailer.
In other words, customers that don't use premium cards subsidize those that do.
Consumers paying in cash are pretty much subsidizing everyone else.


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## lonewolf (Jun 12, 2012)

One of the reasons Costco has been such a spectacular successful bussiness is they keep costs low. Not accepting credit cards can be the most practical way to do bussiness . Getting rid of the middleman is just smart. Costco knows to stand alone when the rest does it wrong.

Credit cards do help reduce the underground economy of those that pay cash for goods & services to avoid taxes. A lot of people are deep in debt have no cash so they pay by credit card.


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## m3s (Apr 3, 2010)

This whole love affair with reward credit cards on a financial forum troubles me. The herd despises MER fees, but they adore the merchant fees. They even cheer them on!

Paying 3-6% in fees (shared by everyone) and then running through a maze of traps like a mouse to find some cheese. First you change your shopping habits and your day-to-day life without even knowing it and then you change your vacations and discretionary purchases without knowing it. All the while thinking you are somehow getting ahead when the carrot's on a stick.

I would rather pay 1-2% on a regulated system and not have to waste my time jumping through a bunch of hoops. Credit cards used to be evil but now you encourage all your friends to sign up. Ingenious


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## indexxx (Oct 31, 2011)

HaroldCrump said:


> Consumers paying in cash are pretty much subsidizing everyone else.


Yes- great, isn't it? I get to bump up my cash back rewards by using my card for everything and it costs me nothing extra.


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## m3s (Apr 3, 2010)

indexxx said:


> Yes- great, isn't it? I get to bump up my cash back rewards by using my card for everything and it costs me nothing extra.


Not enough people pay in cash any more to subsidize the fees, and nobody is getting away with more cash back than the fees either, so yes it does cost you extra... V and MA profits are what's "bumped up"


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## Spudd (Oct 11, 2011)

The problem is, that me individually stopping using my card only costs me money. So unless they change the system, everyone will keep using their rewards cards and the prices will just have to increase to account for it.


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## andrewf (Mar 1, 2010)

This is a classic prisoners dilemma. Government regulation is needed to either/both:

-cap transaction fees for merchants
-allow merchants to offer discounts for other, lower cost methods of payment such as cash or debit. Equivalently, allow merchants to transparently pass on the cost of credit card transactions to the purchaser.


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## m3s (Apr 3, 2010)

Spudd said:


> The problem is, that me individually stopping using my card only costs me money. So unless they change the system, everyone will keep using their rewards cards and the prices will just have to increase to account for it.


The Competition Tribunal in the thread title _is_ about changing the system... it isn't about you as an individual! I see no reason to call this good news besides owning V or MA. I can't imagine people are this naive... maybe hoping to be like one of the blogs making $4000/month on reward card referrals. Merchant fees of $5 billion a year in a country of 34 million makes me pause for concern, not jump for joy


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## Echo (Apr 1, 2011)

andrewf said:


> This is a classic prisoners dilemma. Government regulation is needed to either/both:
> 
> -cap transaction fees for merchants
> -allow merchants to offer discounts for other, lower cost methods of payment such as cash or debit. Equivalently, allow merchants to transparently pass on the cost of credit card transactions to the purchaser.


Retailers are already allowed to offer discounts for cash and debit transactions. Most choose not to offer that discount. 

The problem I have with organizations like the CFIB is that they're trying to tug at our heartstrings by making this about the poor mom & pop retailers. I have no problem paying cash at the corner store if it'll help out those small business owners. But who would ultimately benefit from the ability to surcharge? Airlines, hotel chains, giant supermarkets and gas stations. Big retail outlets who already do enough volume to negotiate lower fees with the card issuers. Consumers will not benefit from this ruling being overturned.


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## HaroldCrump (Jun 10, 2009)

For consumers to benefit, the savings must be passed on by the retailers to consumers.
Not added back to their margins.

The reason this scam has been working well for credit card companies and reward companies like Aeroplan and Air Miles is because of competition among the retailers.
Just like individuals, no single retailer will make this change unless everyone does.
Whichever retailer (or consumer) makes this change will be at a competitive disadvantage.


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## m3s (Apr 3, 2010)

$5 billion per year in a country of 34 million (according to the quoted article) and yet there's no where the consumer could benefit by reducing those fees?.. I read many of the personal finance blogs about reward cards ad naseum, and no one is really beating them at their own game. You get a certain % back after paying a similar % and you change your habits to achieve that reward you paid in the first place... The retailers who offer extra rewards do benefit with extra business but this just means the consumer habits are being manipulated, which is the whole point and now you can't even avoid it. If you enjoy the maze that's fine with me... just regulate the size of the cheese to something reasonable and give me an option to skip it!


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## Echo (Apr 1, 2011)

Good discussion about this on The National last night - http://wheredoesallmymoneygo.com/the-true-cost-of-credit-card-reward-programs-and-more/


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## HaroldCrump (Jun 10, 2009)

I agree with you m3s. However, the point I am trying to make is that consumers will benefit only if the retailers pass on the savings by reducing the prices of goods and services.
If govt. regulation allows the retailers to pass on the premium card fees directly to the users of those cards (instead of embedding it in the product prices), but the retailers do not reduce the prices, then they would simply have pocketed it as extra profits.

I agree that we need transparency all around - right from the issuers of these premium cards, down to the retailers.

The real losers if such regulations were imposed would be the rewards companies such as Aeroplan and Air Miles.
That is why AIM stock went up yesterday.
Those companies not only make money from the spread between the cost of the reward and the fee kickbacks from the credit cards, but also by selling consumer information, buying and behavior patterns to direct marketers.
Overall, it is a pretty louche business model that they have.


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## AGHFX (Aug 31, 2012)

Many discussions on this topic (on and off the forum) seem to greatly revolve around the subsidisation of all (cash, interac, and credit card paying) customers for the fees imposed by credit cards. Yes, credit cards come with merchant fees - but there are also soft costs created solely by the use of cash. By accepting cash, the merchant must invest more time into counting the physical means. Cash registers must be counted. Bank deposits must be made. For larger merchants - cash is transported by an armoured vehicle. Coin and small bills must be ordered or picked up from banks. More time spent doing the accounting is required due to the higher human involvement in the transaction process - POS terminals help increase efficiency in this respect because they have large databases of memory. Let's not forget the increased liability of having physical cash in the store - whether it be a robbery or employee theft.

I'm not saying the fees are reasonable - I agree that us Canadians are far too complacent and need to do something about it. We should be demanding more transparency in our retail system. We should come up with a solution. The point I'm trying to make, though, is that cash-paying customers aren't the victims subsidizing the costs imposed by credit cards.


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## m3s (Apr 3, 2010)

AGHFX said:


> I'm not saying the fees are reasonable - I agree that us Canadians are far too complacent and need to do something about it. We should be demanding more transparency in our retail system. We should come up with a solution.


It's funny that if I pull out a credit card at a local place in Europe the cashier usually makes a sour face. They know about the fees and actually ask apologetically if I can please use debit or cash instead. It's a cultural difference I guess. The old fashion places offer a discount for cash, but this one can lead to even worse tax evasion in some countries. The rewards and the fees just need to be regulated down to something reasonable imo. I like credit cards for the extended warranty, price match, rental insurance, travel insurance safety nets etc (that I've never managed to use in +10 years) but the rewards are always a huge pita game or collecting your data etc


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## andrewf (Mar 1, 2010)

My understanding is that some merchant agreements prohibit merchants from charging an additional fee for using CC. This practice should be banned.

Harold, I think your fear about retailers passing on savings is unfounded. Retailing is highly competitive and persistent cost savings are usually passed through the consumers pretty quickly.

On whether CCs add enough value for retailers to justify their fees, that will be up to retailers to decide. If they feel CCs save them money from handling cash, there is no need to charge an additional fee for customers using CC.


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## HaroldCrump (Jun 10, 2009)

andrewf said:


> My understanding is that some merchant agreements prohibit merchants from charging an additional fee for using CC. This practice should be banned.


The question is not about charging fees to consumers for using _any_ credit card, but specifically these high fee premium cards.
If we legislate and prevent retailers from passing on these costs, then where is the limit on premium card fees? It can only keep going up and up.
If that is what we as consumers want, then fine. But at the very least there should be transparency.
Consumers need to understand how big these fees are, and that their cost is being factored into the price of goods and services.


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## Xoron (Jun 22, 2010)

m3s said:


> I like credit cards for the extended warranty, price match, rental insurance, travel insurance safety nets etc (that I've never managed to use in +10 years) but the rewards are always a huge pita game or collecting your data etc


And what is paying for some/most/all of those guarantees  The fees that are charged to the merchants, paid for in inflated prices. Or by the card holder directly by way of yearly fees.


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## Echo (Apr 1, 2011)

Let's be honest, as a society we're moving away from cash because it's inconvenient and expensive to carry. But what's going to happen when we all start paying for items with our smart phones? That movement is coming sooner than later. I see Rogers has applied for a bank license so they can issue their own credit cards. 

I wonder how the complicated web of fees will be handled when the phone company, bank and credit card issuer all take a piece of the action. Let's not forget about payment gateway companies like Moneris, another middleman who takes a cut along the way.

Someone has to pay for this convenience.


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## m3s (Apr 3, 2010)

Xoron said:


> And what is paying for some/most/all of those guarantees  The fees that are charged to the merchants, paid for in inflated prices. Or by the card holder directly by way of yearly fees.


Like I said I've never actually benefited from any of them financially. I don't pay for extended warranties because they're a huge cash cow, I don't price match because I get a good deal in the first place and forget about it, I buy my own travel insurance because the credit card one is far too limited etc. I like having them but I've never actually used any of them, and I would much rather save an additional 1% on all my purchases and pay for services I actually need tailored to my needs etc.... I'm not asking to go back to cash... what's so bad about debit cards? (Besides that Canada has some of the most expensive bank fees in the world, debit cards can be very cheap, as could smartphones if properly regulated)


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## Echo (Apr 1, 2011)

Debit will remain cheap as long as Interac remains the dominant player (and it remains a non-profit company). But with Visa Debit cards becoming more prevalent in Canada we could see the banks side with Visa and MasterCard to make more money and kill off low-cost debit services.


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## m3s (Apr 3, 2010)

Echo said:


> Good discussion about this on The National last night - http://wheredoesallmymoneygo.com/the-true-cost-of-credit-card-reward-programs-and-more/


Good link, it's handy for me that CBC is on YouTube :encouragement:. Best quotes from the video "It's just like mutual fund fees, Canadians are so complacent.." "You're doing something that's fundamentally inefficient in an economic sense" I agree. Someone also mentioned she would chose Walmart over the small vendor just to collect rewards, and that small vendors do ask for debit/cash

So other countries have regulated the fees to 0.5% but Canada probably won't do that (for the same reason we don't regulate roaming fees and other madness which many other countries do). Our telecoms and banks make a killing (you say Interac is non-profit, yet you also tell people on your blog to avoid bank fees from debit cards! So why are banks apparently charging so much per debit card transaction if it's non-profit)

On a $1000 purchase we're talking about 12 cents to use a debit card vs $30 on a credit card. From what I see on these forums and blogs people would bend over backward for a such an easy $30 saving but when it's hidden...


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## Echo (Apr 1, 2011)

m3s said:


> You say Interac is non-profit, yet you also tell people on your blog to avoid bank fees from debit cards! So why are banks apparently charging so much per debit card transaction if it's non-profit


Interac is non-profit but they were founded by the big banks (http://en.wikipedia.org/wiki/Interac)

They talked about this in the video - the real enemy here is the banks, not the card issuers. Why do the banks all charge between $10 and $15 per month for unlimited chequing? Why do they all charge $1.50 per e-Transfer when ING can do it for free? Seems like a cartel to me.

When my wife and I were students we had free student chequing accounts and unlimited debits. Then when we finished school, we went into the bank and the rep said, "based on your transaction history (20+ debits a month) we recommend you get the unlimited chequing account", at $12.95 per month - each! That's over $300 a year in bank fees.

Later on I learned about the no-fee banking options at PCF and ING. Now I've structured things so that I can bank for free (basic account at TD with $1,500 min. balance, free chequing account at ING for debits and email transfers), plus get a bit of cash back on my spending by using a cash back credit card (WITHOUT altering my behaviour).

I like the rewards and I don't see anything wrong with collecting them. I do tell people to avoid bank fees, which they can do by simply switching to PCF, ING, BMO Club Sobeys or a number of credit unions. I just want people to save money.

If retailers are allowed to surcharge credit card transactions then it'll no longer be advantageous to use a rewards card and I'll recommend some other way to save money.


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## MrMatt (Dec 21, 2011)

Echo said:


> Debit will remain cheap as long as Interac remains the dominant player (and it remains a non-profit company). But with Visa Debit cards becoming more prevalent in Canada we could see the banks side with Visa and MasterCard to make more money and kill off low-cost debit services.



Interac is expensive for end users, which is why I use a credit card for almost everything.
BTW, Costco accepts their Amex only. But they have the clout to do so. It probably costs them as much to accept their own Amex as handling cash anyway.


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## OhGreatGuru (May 24, 2009)

Costco undoubtedly has an agreement with Amex that is lucrative to both parties. In some countries this would probably be considered a restraint of trade practice. From the perspective of the customer it is a pain in the butt. I remember when Canadian Tire would only accept CTC credit cards, and the big department stores would only accept their store credit cards. But they all eventually caved to VISA and Mastercard.


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## andrewf (Mar 1, 2010)

MrMatt said:


> Interac is expensive for end users, which is why I use a credit card for almost everything.



How so? Debit transactions are free for this end user.


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## ChrisR (Jul 13, 2009)

andrewf said:


> How so? Debit transactions are free for this end user.


I think most people pay more for their debits than they know.

I get 12 free transactions a month, then I pay through the nose. (I think it's a $1.25 per transaction?) 

And if you pay a monthly fee for a premium checking account... well, you're really just pre-paying your debits!


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## NorthKC (Apr 1, 2013)

Use a no-fee bank account. Problem solved


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## kcowan (Jul 1, 2010)

What many people forget is that handling cash is not free. It is estimated to cost 5% to handle the cash needed to run a large retail operation. So the only low-cost payment method for the retailer is Interac.


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## andrewf (Mar 1, 2010)

NorthKC said:


> Use a no-fee bank account. Problem solved


I have a hard time not thinking that people who pay banking fees are idiots.


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## andrewf (Mar 1, 2010)

kcowan said:


> What many people forget is that handling cash is not free. It is estimated to cost 5% to handle the cash needed to run a large retail operation. So the only low-cost payment method for the retailer is Interac.


I find 5% to be incredible. There's no way it costs a grocery store $3 or 4 million a year to handle cash.


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## randomthoughts (May 23, 2010)

I don't, really, but it's disproportionate for larger organizations. A mom-and-pop shop will just stay a bit later counting, and deposit in the bank whenever they're going. So it's sort of the difference between doing renos yourself and paying a contractor.

Beyond the direct costs of dealing with cash, there's also indirect costs - cash is slower to handle, meaning more cashiers are required for busy time, etc.


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## andrewf (Mar 1, 2010)

I question that. I find cash transaction are often faster, with no need for PINs, signatures, etc.


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## Echo (Apr 1, 2011)

The fastest transactions are done with contactless payment (PayWave, PayPass, Interac Flash). Quick service restaurants like McDonalds and Tim Hortons have figured this out and upgraded their payment terminals to handle these types of transactions. Shaving off even a few seconds per transaction makes a big difference, especially in a drive-thru business.


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## m3s (Apr 3, 2010)

Echo said:


> WITHOUT altering my behaviour


I'm all for the saving money, but you are cheering on the rewards cards. You enjoy playing the system like some people enjoy clipping coupons from a paper in their spare time

You have to read all the rules or blogs to learn the system, in your case enough to write about them. You're behavior is altered extensively and they have designed the whole thing to do so. You either have to study the constantly changing unregulated game or it beats you. It beats most people, that's the point.

I'd much rather just pay 0.5% like other countries and spend my time on something more rewarding. The Airmiles are worthless to me (rewards are all junk) and the cash back is less than the fees


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## kcowan (Jul 1, 2010)

Handling cash involves getting the initial inventory from the bank and allocating it to the cashiers. This float costs money and the cashiers must count it to double check their initial float. Plus there is a costs to carrying that float all day. Each cashier maintains their cash drawer and then it is counted twice when they close out. In the case of an imbalance, its is recounted many times.

Granted, these costs do not go away completely by using debit. It just reduces the volume. But when cash is eliminated, such as on WestJet, they do get the savings.


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## Echo (Apr 1, 2011)

m3s said:


> I'd much rather just pay 0.5% like other countries and spend my time on something more rewarding. The Airmiles are worthless to me (rewards are all junk) and the cash back is less than the fees


Yes, you'd much rather have interchange fees of 0.5%, I get that. But in our current reality, that's not the case. If retailers are embedding the interchange fees in the price, then the only way to break even is to play the game and collect the points (or cash back). Otherwise you're on the losing side. You may not like it, but that's a fact.


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## m3s (Apr 3, 2010)

Echo said:


> In our current reality, that's not the case.





Echo said:


> Good news for rewards cards fans - http://www.theglobeandmail.com/report-on-business/credit-card/article13359707/
> 
> I know there's a lot of people who feel the plight of small business owners, but I don't really see how consumers would benefit if retailers were allowed to impose surcharges or refuse certain cards.


From what I understand the "reality" is up for debate. It probably won't change because most Canadians are complacent and think rewards are good news, not because it's better for consumers and merchants. It's good news if you own Visa or the banks or collecting commission from signing people up


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