Tired of paying for your brother-in-law’s Mega Gold credit card?

Do you want to pay for part of the plane tickets that your rich brother-in-law bought using points from his Mega Gold Platinum credit card?

Of course not.

Yet that is what Quebecers do collectively: they all finance, regardless of their level of income, the cost of credit cards, particularly the most prestigious ones… which are reserved for the wealthiest customers.

Using a credit card is never free. The merchant must remit 1.5% to 4% of the bill in fees to Visa or Mastercard, according to figures from the Canadian Federation of Independent Business.

Most cards have total fees varying between 1.5% and 2.5%. The greater the customer rewards (the Mega Giga Gold Platinum card), the higher the fees.

Since a merchant cannot charge these costs to the customer (the Consumer Protection Act (LPC) requires the actual price to be displayed and prevents certain customers from being overcharged), these charges are hidden in the price. All customers, whether they use credit cards or not, finance them.

How to put an end to this bizarre and unfair situation? The Trudeau government needs to put on its pants and force credit card companies to lower their fees.

That’s good: the debate will take place in English Canada, where merchants have just won, following an amicable settlement, the right to “overcharge” customers who pay with their credit card. The situation does not change in Quebec, where the CPA prohibits this practice.

Starting this week, the telecom company Telus will charge 1.5% more to its customers outside Quebec who pay with their credit card. Our little finger tells us that she will not be alone for long in doing so.

Passing the bill on to consumers is a trap that does not solve the heart of the problem: the credit card fees charged to merchants – and passed on in one way or another to consumers – are too high.

Justin Trudeau’s Liberals have promised to tackle it in 2021. They are still thinking.

The solution, however, is simple: Canada has only to copy the European Union. For years, Europe has tried to lower credit card fees. Without success. In 2015, Europe therefore notably:

• imposed a cap on credit card interchange fees (interchange fees represent approximately 75% to 85% of total credit card fees);
• allowed merchants to refuse certain premium credit cards (their contracts with Visa and Mastercard did not give them this option in practice).

In Europe, “interchange” fees cannot exceed 0.3% of the value of the transaction. In Australia, the cap is 0.5%. In Canada, the average of these fees is… 1.5%.

If Ottawa reduced interchange fees to 0.3% like in Europe, it would reduce hidden fees by about $341/year per credit card in Canada.

We have no illusions: some merchants will keep these savings for themselves. But it’s better than the current situation, where SMEs are suffocated by high credit card fees.

Ottawa must therefore regulate credit card fees to reduce them at European level, and allow merchants to refuse certain expensive cards.

The current system favors financial institutions, which pocket about 60% of credit card fees. Visa or Mastercard receives 20% of fees, customers/consumers 20% in the form of rewards.

With a reform like in Europe, credit card loyalty systems would become less generous. Not serious. They have too many perverse effects.

Lower credit card fees mean downward pressure on prices for all consumers. This is by far the most important.

Not the plane ticket your brother-in-law wants to buy with his points.