In Hamilton, some small businesses are reluctant to pass on their credit card processing fees to their customers.
Starting Oct. 6, businesses across the country can charge customers using credit cards an additional fee to offset merchant costs. This comes after the settlement of a long-running class action lawsuit with Visa and MasterCard earlier this year.
But small businesses in Hamilton who are already struggling with low profit margins amid the recovery from COVID-19 and high inflation fear the extra fees will drive away their customers.
Ashraf Abu Shakra, manager of Mediterranean grocery store Al Sham Market on Fennell Avenue East, said he didn’t want to lose customers by passing the surcharge on to credit cards.
He said demand for international groceries in his store was weak amid high inflation and “people are only buying essentials”. This, combined with potential additional charges for using a credit card, would hurt his business, Abu Shakra said.
Although credit card transaction fees and inflation “affect our (profit) margins, we try to compensate with something else, maybe offers or promotions,” Abu Shakra said.
About two in five small businesses do not know if they will pass on the surtax, while one in five small businesses are considering the option, according to a recent survey by the Canadian Federation of Independent Business (CFIB).
Another 26% of businesses said they would see what their competitors are doing, and 15% of businesses determined they wouldn’t charge extra for credit cards.
Ryan Mallough, vice president of legislative affairs in Ontario at CFIB, told The Spectator that a corporate decision to pass credit card charges on to customers “is emblematic of the current situation,” which is ” still very precarious.
The pandemic recovery “is a long way off” for businesses across Canada, with the average debt level for a small business in the country at $130,000, Mallough said.
On the consumer side, “everyone is feeling this pinch on the pocket (due to inflation). So adding costs publicly is not really in the cards for a lot of small businesses.
In response to high credit card fees, businesses are also encouraging customers to pay by debit or cash.
Mallough thinks the move could eventually push credit card companies to reduce or standardize credit card fees like in Australia. Canada is one of the countries with the highest credit card fees, with an average surcharge of 1.4%. The reason why it is high is not known.
Business-to-business organizations, meanwhile, might tend to charge their customers a fee for credit card use, Mallough said.
But not in the case of Wellington Street-based Minuteman Press. Justin Bester, owner of the company that prints maps and posters for Hamilton businesses, said he would continue to bear the cost of credit card fees and treat it as an operational expense.
“It’s not fair to the consumer. It is our responsibility. It is not the burden of consumers,” he said.