Credit card transaction fees cost everyone. We know this. It costs merchants, and probably contributes, in some fashion, to prices inflation felt by consumers who use credit cards. On top of this, Canadian taxpayers are paying more credit card fees due to the costs to the government.
According to the Senate Standing Committee on National Finance, credit card fees cost the federal government about $13 million a year. That's not a small amount of money. Here is what the Liberal Senate Forum reports on the cost of credit card fees to Canadian taxpayers, as explained by Senator Pierrette Ringuette:
“Canadians are paying almost $13 million dollars a year, not including Crown Corporations, to giant corporations like VISA and MasterCard. That is taxpayers’ money going directly into the pockets of corporations who are making record profits, instead of being used to fund programs and infrastructure that will help Canadians."
What Can Be Done?
When it comes to protecting private businesses, the CFIB has a public education campaign designed to educate consumers about the cost of using credit cards. Credit card transaction fees amount to, on average, 3% of a transaction. This means that for every $100 spent, $3 goes to a transaction fee. With debit cards, on the other hand, the fee is a flat $0.12 per transaction. That's a big difference in cost. Encouraging consumers to use cash or debit instead of credit is one way that small business can see some protection from big fees.
The government, however, doesn't have that option -- unless business is switched to debit card use. Switching to debit cards could be problematic, though. There are some thoughts on this, though. The Liberal Senate Forum reports that Australia has a rule about government fees:
"Australia capped merchant fees for municipal, provincial, and federal governments at 0.33% 7 years ago. Under that cap, the federal government and the Canadian taxpayer would have saved over $10 million in 2009/10 alone."
That's not a bad savings. When you start thinking about the sorts of things that money is spent on, and the ways that taxpayer money could be spent to help the Canadian people, it seems a little off that so many millions should be going to already-profitable credit card companies.
Looking for Ideas from Other Countries
Canada seems to be looking around quite a bit for ideas to help solve different problems -- especially costly ones. Australia seems to be a popular model. Canada is already thinking of following Australia's example and ditching the penny. This is a move that could save billions when it comes to minting and distributing pennies. Now, it appears as though Canada is looking to Australia for inspiration regarding credit card transaction fees.
Yes, credit card companies need to make money. Business is important. But, consumers already pay the price for credit card fees, in the form of higher prices that merchants pass on, when they swipe plastic at the store. Do they need to pay fees indirectly via their tax dollars?
This post was included in the Carnival of Wealth at Personal Dividends.
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