Government reduces credit card fees by 27 per cent for small business owners

From: Department of Finance Canada

News release

October 17, 2024 – Hamilton, Ontario           

Canada’s small- and medium-sized businesses create good-paying jobs, keep main streets flourishing across the country, and deliver the dream of entrepreneurship. It is essential that these businesses thrive so they can continue being the bedrock of our communities and our economy.

Small businesses pay fees to process credit card transactions, with the largest component being the interchange fee paid to credit card-issuing financial institutions, such as banks. That is why the federal government negotiated and finalized new agreements with Visa and Mastercard, which also protect reward points offered to Canadians.

Today in Hamilton, the Honourable Filomena Tassi, Minister responsible for the Federal Economic Development Agency for Southern Ontario (FedDev Ontario), announced that new credit card fee reductions for small business owners will come into effect this Saturday, October 19, 2024. For qualifying small businesses, Visa and Mastercard have agreed to:

  • reduce domestic consumer credit interchange fees for in-store transactions to an annual weighted average interchange rate of 0.95 per cent;
  • reduce domestic consumer credit interchange fees for online transactions by 10 basis points, resulting in reductions of up to 7 per cent; and,
  • provide free access to online fraud and cyber security resources to help small businesses grow their online sales while preventing fraud and chargebacks.

More than 90 per cent of businesses that accept credit cards will receive lower rates and see interchange fees reduced by up to 27 per cent. These fee reductions will save eligible small businesses about $1 billion over five years.

Reduced credit card transaction fees will save small businesses thousands of dollars every year. For example, if a store processes $300,000 in credit card payments, they currently pay nearly $4,000 in annual interchange fees. With these new agreements, the store could save $1,080 in fees every year. The federal government expects all members of the credit card industry, including payment processors, to pass these savings on directly to small businesses.

Second, the federal government announced a revised Code of Conduct for the Payment Card Industry in Canada to protect over 1 million businesses that accept credit card and debit card payments from customers. Starting on October 30, 2024, the revised Code will help businesses compare prices and offers from different payment processors, and shorten the complaint handling response time by nearly 80 per cent to just 20 business days. All major payment card network operators in Canada have agreed to the terms of the revised Code. Certain obligations requiring complex or technical system changes will come into effect by April 30, 2025.

In addition, the federal government announced the payment amounts for the new Canada Carbon Rebate for Small Businesses, which will deliver over $2.5 billion to about 600,000 Canadian businesses before the end of this year. The Canada Carbon Rebate for Small Businesses will deliver up to $4,010 to a business with 10 employees in Ontario, $59,100 to a business with 50 employees in Alberta, and $576,844 to a business with 499 employees in Saskatchewan. Small businesses in Manitoba, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador will also receive payments.

The government is taking action to help small businesses start up, grow, and thrive by reducing the costs of running a business. These reduced credit card fees for small business owners build on the government’s lowering of the small business tax rate to 9 per cent—which is already saving small businesses $6.6 billion every single year. 

Quotes

“Small- and medium-sized businesses are the backbone of our economy, and today, we are once again delivering real, tangible support to help them thrive. We are making it cost less for businesses to start up, grow, and thrive, so they can help our main streets flourish. By reducing the cost of accepting credit and debit payments, eligible small businesses can expect to save about $1 billion over five years, allowing entrepreneurs to put more of their money towards growing their business.”
– The Honourable Filomena Tassi, Minister responsible for the Federal Economic Development Agency for Southern Ontario 

Quick facts

  • Businesses pay fees to process credit card transactions, with the largest component being the interchange fee paid to credit card-issuing financial institutions, such as banks. The federal government has finalized agreements to lower these fees for small businesses starting on October 19, 2024.

    • Small businesses will qualify with each credit card network individually.
      • Small businesses with annual Visa sales volume below $300,000 will qualify for the lower interchange fees from Visa, and those with annual Mastercard sales volume below $175,000 will qualify for the lower fees from Mastercard.
      • Non-profit organizations with transaction volumes below these thresholds will also benefit from reduced rates.

  • These new agreements with Visa and Mastercard will deliver significant savings for small businesses:

    • Malik and Sebastian own a small local sport store in Edmonton with $300,000 in annual credit card sales ($200,000 in Visa sales and $100,000 in Mastercard sales). Each year, they currently pay $4,000 in interchange fees on these credit card transactions. Because of new agreements secured by the federal government, they are expected to see interchange savings of 27 per cent or $1,080 per year. Malik and Sebastian can use that $1,080 to advertise and grow their business.
    • Farees and Hadeel own an independent bookstore in Brampton with $120,000 in annual credit card sales ($70,000 in Visa sales and $50,000 in Mastercard sales). They currently pay $1,600 in interchange fees on these sales every year. Because of these new agreements secured by the federal government, they are expected to save 27 per cent or $432 per year, which they can use to open a new online marketplace and grow their business.

  • The Code of Conduct for the Payment Card Industry in Canada was first released in 2010 and was last updated in 2015.

    • More than 1 million businesses that accept payment cards in Canada will benefit from the Code revisions. In 2023, these businesses accepted approximately 14.1 billion card payments worth $1.2 trillion.
    • The increased transparency and disclosure elements of the revised Code require payment processors to notify eligible businesses if network fee reductions will not be passed on in full. Additionally, payment processors must remind those businesses of their right to terminate their contract, enabling them to switch to a processor that passes on the benefits of rate reductions.

  • The Canada Carbon Rebate for Small Businesses will be returned to eligible businesses that filed their 2023 tax return by July 15, 2024. They will receive their payment by:

    • December 16, 2024, if registered for direct deposit from the Canada Revenue Agency; or,
    • December 31, 2024, if receiving payment by cheque.

  • To ensure all eligible businesses can receive their Canada Carbon Rebate for Small Businesses, the government is proposing to extend the deadline for businesses that file their tax return from July 15, 2024, to December 31, 2024. Late filers would receive their payment at a later date, subject to Royal Assent of the required legislation.

Related products

Associated links

Contacts

Katherine Cuplinskas
Deputy Director of Communications
Office of the Deputy Prime Minister and Minister of Finance
Katherine.Cuplinskas@fin.gc.ca

Media Relations
Department of Finance Canada
mediare@fin.gc.ca
613-369-4000

General enquiries
Phone: 1-833-712-2292
TTY: 613-369-3230
E-mail: financepublic-financepublique@fin.gc.ca

Stay Connected

Twitter: @financecanada
RSS

Page details

Date modified: