Waiting for a decision on credit card surcharges

Canada’s Competition Tribunal will soon release a ruling on a case against Visa and MasterCard, started in 2010.

The credit card companies prevent retailers from refusing to accept “premium” credit cards that offer reward miles, points and other benefits for consumers, but for which merchants pay higher processing fees.

Some retailers, such as Sam James in Toronto, have switched to a cash-only format to avoid paying high credit card fees that hurt their profits.

If the tribunal sides with retailers that want to pass on credit card fees directly to customers, Canadians could be hit with big surcharges on purchases, warns the Consumers’ Association of Canada.

Here is a guest post by Angie Picardo, a staff writer with Nerd Wallet, about how surcharge fees may be coming to Canada.


There are three rules that both Visa and MasterCard enforce for retailers opting to accept their cards for payment.

1. Retailers must accept all cards

If a company opts to accept either MasterCard or Visa, they cannot differentiate between the types of card accepted. For example, retailers cannot specify that they will accept a MasterCard SmartLine Platinum but refuse a National Bank Allure MasterCard.

2. Retailers cannot discriminate

If a customer opts to use a credit card with a higher card acceptance fee, that card must still be accepted as a suitable means of payment and the customer cannot be treated differently for deciding to choose that specific card.

3. Retailers cannot require a surcharge

Retailers are not allowed to independently require additional surcharges to customers who pay with Visa or MasterCard.

What’s the problem with that?

The driving force in the case against Visa and MasterCard is that they hold a near monopoly over credit cards in Canada, as both companies together comprise about 92 per cent of the market.

As Visa and MasterCard release “premium” credit cards, most of the cost is subsidized by merchants. The Competition Bureau estimates that high transaction costs result in businesses paying for about $5 billion in hidden fees annually.

Canada is not the first country to tackle credit card transaction costs and surcharging.

In the United States, Visa and MasterCard faced similar charges and opted to settle out of court in July 2012, allowing retailers to offer surcharges.

It’s predicted that few businesses will impose surcharges, since they have integrated transaction costs into their prices. Also, they’re worried about scaring off customers with increased fees.

In Australia, credit card surcharges were allowed in 2003. Several businesses took advantage and started implementing unreasonable surcharges to compensate for transaction costs.

Responding to an outcry from consumers, the Reserve Bank in Australia is giving power back to credit card companies and allowing Visa and MasterCard to put limits on acceptable surcharge rates.

Although hearings for the Canadian case against Visa and MasterCard have ended, a formal decision has yet to be issued and a report is still in the works.

Recently, Visa increased its transaction rates to merchants by one third and issued a new “ultra premium” card, which comes with higher fees for businesses than the premium cards already on the market in Canada.

MasterCard followed Visa, increasing transaction costs to merchants by 20 per cent.

Consumers, merchants and credit card companies are waiting for the Competition Tribunal’s ruling to decide on their next play.

Angie Picardo is a staff writer for NerdWallet, a personal finance website that helps consumers save money and make smarter decisions about their personal finances, travel plans, or higher education.

Air Canada should improve customer service

I don’t have any complaints about the service on Air Canada flights. But I find the airline often falls short in trying to resolve problems that crop up after a flight.

Years ago, my mother and I waited more than two hours to get our baggage after a one-hour flight from Montreal to Toronto. The aircraft had gone back to the hangar by mistake with many suitcases still on board.

When we complained about the extra cost of parking for my husband who was picking us up, we were told to write a letter to Montreal. This was a nuisance. Why couldn’t Air Canada just hand out $5 or $10 gift cards to us on the spot?

I went to the trouble of writing to Montreal, but still didn’t get any compensation for the error. Then, I complained to the airline’s media contact, resulting in flowers for my mother and Aeroplan points for me.

Air Canada still acts like a monopoly — smug, slow to respond and aiming for customer satisfaction rather than delight. It can afford to live with criticism, since it has locked up many long-haul routes that its domestic rivals can’t offer.

While most companies answer emails within days. Air Canada promises to respond within three to five weeks.

Lost baggage complaints are handled by a call centre in India, which isn’t popular with Canadian customers. Check out Sylvia Duckworth’s lament about her missing laptop at her blog.

After writing columns about Air Canada, I started hearing from readers. Kay-Anne, for example, was upset not to get an apology for poor service when flying home from Antarctica, with a stop in Chile.

“Each time, any response from them came in an envelope with a return address from their head office for customer service in Calgary,” she said.

“My husband and I were so displeased with the lack of satisfaction that when we were next in Calgary, visiting our son, we went to the address listed on the correspondence. We hoped to speak to an actual person, who might at least acknowledge that the company had failed our small group miserably.

“We had great difficulty finding the address and drove by where it should have been several times. Finally, I went into the pharmacy, which seemed to be at the correct address and asked where Air Canada’s customer service office was.

“The lady sheepishly told me I was at the right place. Air Canada Customer Service is a post office box number in a Shopper’s Drug Mart in Calgary.

“You can interpret from our experience and those of others you have written about that Air Canada, in fact, provides no support to customers with genuine concerns.”

WestJet has built its business on showing special care to its “guests.” (No one refers to them as customers.) I rarely get any WestJet complaints and when I do, I find they’re resolved in an instant.

Porter Airlines tries to excel by offering free snacks and cappuccino at its Toronto Island terminal and free wine on board. Passengers feel pampered finding leather seats throughout the plane, not just in . executive class.

Air Canada needs to respond to complaints more quickly. It needs to value its customers’ energy and time spent straightening out messes. It needs to appoint an ombudsman (a position that once existed and was wiped out) to do independent reviews of disputes.

This large airline is protected from domestic competition on many routes. Let’s put pressure on it to choose excellence, rather than mediocrity, in helping customers with their problems.