Will reduced Mastercard, Visa credit card fees help N.S. small business?

Small business owners in Nova Scotia are voicing mixed reactions to the federal government's announcement last week that it has negotiated lower interchange fees that businesses have to pay each time a customer uses a Visa and Mastercard credit card.

Beginning in the fall of 2024, in-store credit card interchange fees will be reduced from an average of 1.4 per cent to 0.95 per cent, for businesses with less than $300,000 and $175,000 in annual Visa and Mastercard sales respectively. 

Shop owners across the country have complained for years that high credit card fees are hurting them. Research by the Canadian Federation of Independent Business (CFIB) found that 81 per cent of small businesses cut into their profits to cover the costs of accepting credit cards.

Maureen Horne-Paul, who co-owns an ice cream and a fish and chips shop in Annapolis Royal, N.S., said these changes will have minimal to no impact on her bottom line.

"It doesn't offset in any way shape or fashion the increase in operating costs that I have," she said.

"My costs have gone up almost 20 per cent," Horne-Paul said. "Some of my costs have gone up 300 per cent because I operate a restaurant."

She said she has noticed significantly fewer people use debit cards compared to credit cards which have higher transaction fees for businesses.

"Even for small purchases [like] fries and a drink, people are using credit cards instead of using their debit card," Horne-Paul said.

David Beattie, who co-owns an inn and a brewery in Parrsboro, said he welcomes the fee changes. He estimates the reduced fees will result in $800 to $1,000 in savings annually across both businesses, which he said take in about $300,000 in combined credit card sales each year.

"While that might not seem like a lot of money," Beattie said, "every dollar that goes to the bottom line allows us to maybe pay another week's wages for an employee or buy a new piece of equipment or do something that enhances our business with more advertising."

Following a legal settlement last year, Visa and Mastercard changed rules to allow Canadian businesses to pass on the cost of interchange fees to customers. 

However, Beattie said his businesses have not implemented any surcharges because credit cards form a big part of the business.

Martin Ruiz Salvador, who co-owns five Lunenburg restaurants which employ 126 people in peak season, said his businesses won't qualify for the lower fees as they have sales volumes higher than the threshold.

"When you have [up to] $80,000 a year being taken off your income from credit card fees, you know, it just doesn't seem right," he said.

Lobbying for higher income limits

Ruiz Salvador, Beattie and Horne-Paul each expressed concern that businesses are shouldering the cost of the convenience and benefits that credit cards can provide. 

Duncan Robertson is the Nova Scotia policy analyst for the CFIB lobby group. He said the fee reductions will be a "good first step."

"At CFIB we're pushing … to increase [the $300,000 and $175,000 thresholds] to make sure it includes as many small businesses as possible," Robertson said.

Robertson said the fee reductions will be automatic for merchants and that the CFIB is pushing for the fee reduction to be in place earlier than the fall of 2024.