Small Grocers Crushed by Credit Cards

Small businesses are the backbone of any society. Yet, the cries of small grocers protesting unjust credit card processing fees fall on deaf government ears. As credit card companies raise processing fees, small grocers struggle to keep up with processing fee hikes.

Cost of premium card processing

Recent advertisements aimed at consumers urge Canadians to start buying groceries with credit cards rather than using Interac or cash. In addition, Canadian consumers have received more unsolicited premium card offers over the past year than they have seen throughout the past five years.

While these premium cards may appeal to consumers, small grocers often bear the brunt of premium processing rates. The problem is that premium credit cards cost grocers more to process due to a tiered percentage of total sale system.

On average, a debit card transaction fee costs grocers around $0.07 per purchase. This flat fee is minimal compared to the 2% value-of-purchase fee that credit card companies charge merchants. This fee will increase with the influx of new premium credit card purchases.

Presently, nearly 60-70% of consumers use debit cards (Interac) to purchase grocery items. If all of these people suddenly switch to credit card grocery purchases, the result could be devastating for small grocers.

Grocers request cap on credit cards

The Canadian Federation of Independent Grocers believes that a cap placed on all credit card processing fees would help to solve the present issue. While this may be a viable solution, it is not one that seems to be well-heard.

At present, the Canadian government has yet to respond to this request. If credit card processing fees continue to rise, many small grocers will likely face bankruptcy in the near future. Even those that manage to stay afloat might find it difficult to deal with the newest market about to be cornered by large credit card companies: debit.

Card companies to enter debit market

In addition to increasing credit card processing rates, many credit card companies are now looking into entering the debit card market. These new cards would allow consumers to purchase items with a debit card, and gain all the benefits of a regular credit card (including rewards miles).

Thus, more consumers are likely to use debit cards issued by credit card companies to make grocery purchases. While non-profit Interac only charges a small fee for Interac usage, fluctuating credit card processing rates would likely apply to new debit-credit cards.

Presently, large credit card companies (such as Visa and MasterCard) have not explained how they plan on processing debit card transactions. However, they have not ruled out charging processing fees based upon sales percentages.

_________________________

This guest post was written by Harriette Halepis. Harriett is a professional writer specializing in personal finance. Her work can be found on numerous websites and in various magazines. If you are interested in contributing to SpendOnLife.ca, visit our Write For Us page for more information.