Behind the scenes protests over credit card

This may be the last festive season where the credit card payments will work the way they have been doing so far in Canada. Merchants will not only end up paying less to MasterCard and Visa but the Canadian card holders might see some lowered prices too. This is if the Competition Bureau has its way.

The Competition Bureau has made an announcement last week that some of the written agreements in the contracts between card issuers and the Canadian merchants will be struck down. Merchants, are typically charged anywhere between 1.5% and 3% by the card issuers on all purchases that the card holders make using their cards. However, the Competition Bureau has some doubts regarding the whole operation as it feels that the card companies are indulging in behavior that is anti-competitive. This they feel could be potentially harmful for both small as well as medium businesses that are the backbone of economic growth in Canada.

However, the bureau is not really challenging the fee as most of the merchants pay them without a hitch as they are aware that both the card majors offer services that are very valuable. Their networks are also spread all over and this helps in facilitating payments. However, the bureau has other concerns over what it calls the "merchant restraints" in the card agreements. These restraints are felt as merchants stop encouraging card holders to make payments using other modes other than the card because merchants end up paying the acceptance fees to the card companies. But both Visa as well as MasterCard claims that they have nothing in their agreements with the retailers where the retailers are prevented from offering any discount to the customer who makes payments using other modes.

In fact, some vendors even go about advertising the discounted prices for those that use cash or debit cards for making payments.

It all finally boils down to consumers paying higher rates on purchases irrespective of whether they use the credit card or pay with cash. This is due to the fact that cards charge the acceptance fees from the retailers. But then who is to blame for this fiasco?

The consumer is the one who is bearing the brunt of high rates as the merchants are pricing their products keeping in mind the acceptance fee that they would be charged by the card companies. So in any case, the consumer who pays through cash is also indirectly being burdened by high rates.

Doug Nicholas

Doug Nicholas, a financial consultant by profession with a Masters degree in International Business from Brown University, is also an ardent writer. Though he has a full time job at one of the companies listed on Wall Street, he does manage to squeeze in time to follow his passion. He puts his ideas to words in his articles related to finance and business.