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Why holiday shopping with credit cards could be more expensive this year.

Your holiday shopping bills could get more expensive, and not just because of inflation. Starting in October, customers paying with credit cards could be charged fees of up to 2.4% on certain transactions by businesses that choose to do so. These fees are called surcharges on credit card acceptance and businesses were not allowed to pass them on to customers – until now.

We know this news is about as welcome as a lump of coal in your stocking. But we still want you to feel like you have a financial partner for the holiday season and beyond. That’s why we’ve put together this simple FAQ for you. It outlines what you need to know about these surcharges and how they can affect your spending habits. Because, at Coast Capital, what matters to you matters to us.

What are interchange fees?

Interchange fees are paid by businesses to credit card companies whenever customers use credit cards to make purchases and complete transactions. These fees are usually priced into the products and services offered by businesses (similar to the way other overhead costs would be). As of October 6, 2022, however, businesses in Canada now have the option to recover these fees by passing them onto customers more directly through surcharges.

Why are customers now being charged interchange fees?

Following a class-action lawsuit against Visa and MasterCard, launched in 2011, businesses in Canada now have permission to pass interchange fees onto their customers through surcharges. Though this rule took effect on October 6th of this year, customers likely won’t be charged until at least November, because businesses are required to alert customers of their decision to add surcharges to transactions, display signage indicating a fee will be charged, provide substantial surcharge reporting to the network provider (such as Visa or MasterCard), and make it clear at the point of payment how much is being added.

How many businesses will add interchange fees?

A recent report shows that businesses most likely to pass interchange fees onto their customers are those that sell to other businesses. Based on this, you’re more likely to be charged a surcharge if you work in industries such as construction, manufacturing, or finance and insurance. But that doesn’t mean you aren’t likely to experience these fees on everyday purchases. 19% of hospitality businesses (such as restaurants), 17% of personal services businesses (such as barber shops and salons), and 12% of retailers intend to push these fees onto customers.

Though these numbers can be alarming, it’s important to put them into context. If recent trends in the United States are any indication of what to expect, only a small percentage of your actual transaction volume will end up being impacted by these surcharges. This is because small businesses tend to make up a minor portion of overall credit card usage, while big businesses – where the majority of people use their credit cards – already price surcharges into their products.

How will surcharges affect me?

The addition of surcharges, on top of inflation and rising rates, could lead to higher prices on everything from groceries to gifts. A bit of math can help you understand what this might look like on your budget.

Canadian families are predicted to pay as much as $15,000 for groceries over the course of 2022. An extra 2.4% on top of that would amount to an increase of $360. Eating at restaurants, where inflation is already rapidly raising prices, could add even more. Canadians spent $48.99, on average, at restaurants in May 2022. Assuming the average Canadian eats out once a week, it can be estimated that the amount they spend at restaurants in a year is about $2,547.88. An extra 2.4% would be about $61.14, essentially the cost of a whole extra visit being spent in credit card fees.

What can I do to offset interchange fees?

Although it is possible that some credit card reward programs can be used where it makes sense, for example your points or cash back are higher than the surcharges you’re incurring—there are other methods of payment you can use to get around the surcharge fees altogether. Great alternative options include cash or debit purchases from your everyday banking accounts, or even lines of credit with low interest rates.

The best way to offset surcharges is having a financial plan that can help you achieve your goals while balancing increased costs from rising rates, inflation, and additional fees. And having the right financial plan starts with having the right financial partner.

We’re here to help.

When you’re a Coast Capital member, we’re with you every step of the way because your success is our success. We deeply value real human connection and that’s why for over 80 years, we’ve been a trusted partner for our members. The more we understand you personally, the better we can help you create the real life you want today.

Don’t let increased fees bring your spirits down this holiday season. Find out how you can plan for higher costs when you visit a Coast Capital branch or call us at 1.888.517.7000.



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This article is provided for general information purposes only. It is not to be relied upon as financial, tax, or investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell. Information contained in this article, including information relating to interest rates, market conditions, tax rules, fees, and other investment factors are subject to change without notice and Cost Capital Savings Federal Credit Union is not responsible to update this information. All third party sources are believed to be accurate and reliable as of the date of publication and Coast Capital Savings Federal Credit Union does not guarantee accuracy or reliability of such sources. Readers should consult their own professional advisor for specific financial, investment, and tax advice tailored to their needs to ensure that individual circumstances are considered properly and action is taken based on the latest available information.

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