In major positive news for businesses all over Canada that accept credit cards, Visa and Mastercard have agreed to cut credit card transaction fees. Visa and Mastercard agreed to lower the interchange rate by ten basis points down to 1.4 percent. It is estimated that the change could save Canadian businesses C$250 a year. The last time Visa and Mastercard agreed to lower feeds was in 2014 when they lowered their interchange fees to 1.5 percent.
The change in interchange rate comes after much discussion in Canada over small businesses having little power to negotiate lower credit card rates compared to large businesses, putting small businesses at a financial disadvantage. The cut in interchange rate will go into effect in 2020 and last for five years.
While American Express was not included in the current deal, the Canadian government reported that American Express Co. agreed to support fairness and transparency in the credit card industry. American Express operates on a different model than the interchange model for its fees which is why it was no part of this announcement.
While any lowering of the interchange rate is good for merchants many retailers believe is the current decrease in interchange rate is too small as it will only save merchants $100 for every $100,000 credit card dollars swiped. However, the government feels that this change could save businesses thousands of dollars over the 5-year period which could be used to invest, expand and create more jobs in Canada.