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Agreement with Visa and Mastercard to Slash Credit Card Fees for Small Businesses

Visa vs Mastercard Interchange

In a pivotal move, Canada’s government finalizes agreements with Visa and Mastercard, lowering credit card transaction feesMastercard to lower credit card transaction fees. These efforts aim to alleviate financial burdens on small enterprises facing challenges from inflation and increased interest rates. This should result in substantial savings for small businesses, totaling approximately $1 billion over the next five years.

Visa vs Mastercard Interchange

Highlights of Visa and Mastercard Agreements

The primary focus of these agreements is to provide relief to small businesses by reducing interchange fees. This reduction, as much as 27%, is a significant step toward alleviating financial burdens on small enterprises. The agreements outline key provisions for both in-store and online transactions. There is a particular emphasis on facilitating growth for small businesses operating in the digital space.

Under the finalized agreements, Visa and Mastercard will:

  1. Reduce Domestic Consumer Credit Interchange Fees: Average interchange rate for in-store transactions will be set at 0.95%.
  2. Online Transaction Fee Reduction: Online transactions will see a reduction of 10 basis points. This translates to potential savings of up to 7% for eligible businesses. This move acknowledges the growing significance of online sales for small enterprises.
  3. Cybersecurity Support for Small Businesses: Visa and Mastercard will offer free access to online fraud and cybersecurity resources. This support aims to empower small businesses to mitigate the risks and fees of expanding their online presence.

Impact of Interchange on Small Business

The direct impact of these agreements is exemplified through scenarios involving small businesses. For instance, Malik and Sebastian, owners of a local sports store in Edmonton, with $300,000 in annual credit card sales, are expected to save $1,080 per year. Similarly, Farees and Hadeel, owners of an independent bookstore in Brampton with $120,000 in annual credit card sales, could save $432 annually. These savings empower businesses to reinvest in their growth, whether through advertising, the establishment of online marketplaces, or other avenues.

In conclusion, the Government of Canada’s proactive approach to securing agreements with major credit card providers reflects a commitment to fostering the growth and sustainability of small businesses. The government anticipates a positive impact on the financial well-being of numerous small enterprises throughout the country. The new rates are set to take effect in the fall of 2024.

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