I’ve heard some recent rumblings from the CIFB and their “concern” over the fees that merchants pay for accepting credit cards. Not coincidentally VISA has started a campaign to encourage people to use their VISA card for small purchases called “smallenfreuden”.
Fortunately I can simply recycle a letter to the editor I wrote back in early 2011.
“The article, Using credit card comes with a price (SP, March 4), says the Canadian Federation of Independent Business is launching a campaign to encourage customers to pay cash because merchants don’t like paying fees to accept credit cards.
What is irritating is that the CFIB is trying to mislead people into thinking that merchants don’t get anything for those fees.
Those merchant fees allow stores to offer customers a convenient and popular means of payment, one that no doubt increases their overall revenue.
They get to offer customers credit without incurring the overhead cost of managing their own credit system. And they get to offload to the bank the risk of non-payment.
The merchants don’t have to evaluate the creditworthiness of customers, hire staff to manage a credit system, sue or hire collection agencies to collect from deadbeats, and they bear no risk of loss since they are guaranteed payment.
They also don’t have to hire staff to handle large volumes of cash, or risk loss to internal or external theft.
All this for one per cent to three per cent of the value of the transaction.
If merchants feel the fee is too high, they can simply stop accepting credit cards, which would put pressure on credit card companies to lower fees.
When demand falls, so does price. Isn’t that Economics 101? Or maybe the CIFB and its members don’t believe in capitalism.”
It’s also interesting to note that whenever the CFIB runs their anti-credit card campaigns, they constantly go on and on about how using a credit card means the merchant pays a 3% fee on that transaction. But wait, according to CIFB’s own website, they offer a loyalty arrangement with a service provider and the fees are less than 1.7%. That’s right, merchants who are CFIB members get special pricing for using CFIB’s preferred service provider. Kind of like how customers get points, or cash back for using certain credit cards. Hmmm.
Also while they have no shame in “complaining” about the fees paid by merchants (poor mom & pop paid $10,000 in fees last month…..boo-hoo…), they neglect to mention that in order to generate $10,000 in merchant fees the merchant had to have credit card sales of $588,000. Assuming they are getting the special CFIB merchant fee rate. I wonder why the CFIB never mentions that?