Canada Makes A Stand for Merchants over Payment Processing Fees

credit card processing

Canada Makes a Stand Over High Credit Card Processing Fees

The Competition Bureau announced today that it has filed an application with the Competition Tribunal, to strike down restrictive and anti-competitive rules that Visa and MasterCard impose on merchants who accept their credit cards.

The Commissioner of Competition alleges that these rules have effectively eliminated competition between Visa and MasterCard for merchants’ acceptance of their credit cards, resulting in increased costs to businesses and, ultimately, consumers. Merchants in Canada pay an estimated $5 billion annually in hidden credit card fees.

The anti-competitive restraints on merchants result in higher prices for all consumers, whether they pay by cash, cheque, debit or credit, because merchants pass along some or all of the high costs they are forced to pay as a result of Visa’s and MasterCard’s anti-competitive rules.

“Visa and MasterCard’s anti-competitive behaviour hurts businesses and consumers alike,” said Melanie Aitken, Commissioner of Competition. “It is particularly harmful for small and medium sized businesses, key engines for economic growth in Canada. Without changes to the rules, merchants will continue to face high costs for credit card acceptance, while consumers, even those who use lower-cost methods of payment like debit or cash, will continue to pay higher prices.”

Visa and MasterCard operate the two largest credit card networks in Canada. Together they processed more than 90 percent of all credit card transactions by Canadian consumers in 2009, representing over $240 billion in purchases.

The rules challenged by the Bureau prohibit merchants from encouraging consumers to consider lower cost payment options like cash or debit, and prohibit merchants from applying a surcharge to a purchase on a high cost card. Further, once a merchant agrees to accept one of Visa or MasterCard’s credit cards, that merchant must accept all credit cards offered by that company, including cards that impose significant costs on merchants, such as premium cards.

Canada has among the highest credit card fees in the world. Many countries have taken steps to reduce the fees paid by merchants. Canadian merchants that accept Visa and MasterCard credit cards must pay a fee ranging between 1.5 and 3 percent or more of each purchase, nearly twice as much as their counterparts pay in Europe, New Zealand and Australia, but slightly less than in the United States. By contrast, the card acceptance and processing fee paid by merchants in the case of an Interac debit transaction is a flat fee of approximately 12 cents, regardless of the value of the purchase. To provide a practical example, a 3 percent hidden credit card fee on a $400 set of snow tires is $12, but if a debit card is used for the same purchase, the fee is 12 cents.

The Bureau is challenging Visa and MasterCard’s rules under the price maintenance provisions of the Competition Act. The Bureau launched its investigation in response to complaints by merchants and their associations and initiated a formal inquiry in April 2009.

The Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.

Fact Sheet: Visa and MasterCard’s Anti-competitive Rules

The Players

Credit Card Networks

  • Visa and MasterCard operate the two largest credit card networks in Canada.
  • Through their networks, Visa and MasterCard provide infrastructure and services such as authorization and settlement of transactions for customers who pay using their respective network’s brand of credit cards.

Credit Card Issuers

  • Financial institutions, such as banks, credit unions and caisses populaires, issue credit cards in Canada.
  • The issuers set annual credit card fees and interest rates charged to card holders and determine reward levels for programs like air miles and cash back.


  • Acquirers are the companies that supply credit card network services to merchants.
  • This includes authorization and processing of credit card transactions, as well as point-of-sale services, such as credit card terminals.

The Fees and How They are Collected and Shared

Card Acceptance Fee

  • Card acceptance fees are paid by merchants each time a customer pays for a good or service with a credit card.
  • The fees are a percentage of the purchase price paid to the merchant by the customer.
  • Fees range from 1.5 per cent to 3 percent or more, and are higher on premium credit cards.
  • Fees are distributed in different proportions to the credit card network, the issuer and the acquirer.
  • The card acceptance fee has three components: the network fee, the interchange fee and the service fee.

Interchange Fee

  • The interchange fee is the amount retained by issuers, such as banks and financial institutions.
  • The interchange fee is the largest fee, representing 80 percent or more of the total card acceptance fee.
  • Increases in interchange fees have consistently resulted in increases in card acceptance fees.

Network Fee

  • The network fee is the amount retained by Visa or MasterCard.

Service Fee

  • The service fee is the amount retained by acquirers who process the transactions for merchants.

Merchant Restraints

Visa and MasterCard rules contain numerous anti-competitive restraints including:

The No Discrimination Rule

  • The no discrimination rule prevents merchants from treating a customer who presents a certain credit card less favourably than a customer who presents a different credit card.

The Honour All Cards Rule

  • The honour all cards rule requires merchants to accept all credit cards from a specific network, including premium reward cards with higher Card Acceptance Fees.

The No Surcharge Rule

  • The no surcharge rule prevents merchants from charging a fee on transactions made with Visa or MasterCard credit cards.
  • This forces merchants to embed credit card transaction fees in retail prices.
  • The no surcharge rule prohibits merchants from setting prices that reflect the actual cost of the payment method chosen by the customer.

Price Maintenance

  • Section 76 of the Competition Act allows the Competition Tribunal, in certain cases, to prohibit an agreement or contract that influences prices upwards or discourages the reduction of prices.

International Comparison

  • Canada has among the highest Card Acceptance Fees in the world.
  • Many countries have taken steps to reduce the Card Acceptance Fees paid by merchants.
  • Canadian Merchants that accept Visa and MasterCard credit cards pay a Card Acceptance Fee ranging between 1.5 and 3 per cent or higher of each purchase. Meanwhile, processing fees in most other countries are significantly lower.

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About the Author

Editorial Team is a leading industry news site for the point of sale and payments industry. We are also the go-to resource for small business owners that want expert tips and inspiration on how to run a successful business. Collectively, our team of experts has decades of POS, payments, and small business experience.