Vaughn MacDonald, owner of Black Squirrel Books & Tea, says that although a third of his customers use credit cards, he will keep prices the way they are.
In the wake of an increase in fees small businesses pay for accepting MasterCard, several merchants in Centretown nonetheless say they don’t intend to raise prices in the near future.
The Canadian Federation of Independent Business announced Jan. 4 that MasterCard Canada plans to increase its “assessment fee” on payment transactions 20 per cent to 7.7 basis points, which works out to a fraction of one per cent, starting July 1.
Some of Centretown’s small merchants were disgruntled, saying the fees are another obstacle to growing their businesses.
“The first thing I thought was ‘Geez, another increase, another fee that I have to pay,’ ” says Kevin Martin, who owns Stroked Ego, a men’s accessory store on Bank Street.
Martin estimates 35 to 40 per cent of his customers use credit cards to pay and his debit and credit fees together totalled almost $1,000 in December.
He says although the increase is a nuisance, it will only set him back about $5 per month making an increase in prices unnecessary.
Like Martin, Vaughn MacDonald, who owns Black Squirrel Books on Bank Street, says about one-third of his customers choose credit when they get to the cash register.
MacDonald says although he’s not happy about the increase, it will not affect the prices of the books he sells.
“Twenty per cent is substantial for sure, but (the fees are) not impacting us a great deal yet anyway. I’ll probably just let it slide,” says MacDonald.
“If I was a business more heavily dependent on credit card transactions, I might feel different,” he says.
Some businesses will feel the sting more sharply. For example, Pub Italia relies heavily on credit cards as a method of payment.
Owner Joe Cotroneo remembers operating 15 years ago when only 10 per cent of his customers used credit cards. Now about 90 per cent pull out plastic when they pay their tabs, he says.
While he doesn’t plan to change the prices on his menu quite yet, Cotroneo warns that the cost would eventually be passed down to the consumer.
“When the time comes that we’re looking at price changes, it’s one of the calculations that have to be taken into account,” he says.
Dan Kelly, president of the CFIB, says while 7.7 basis points is still just a fraction of a percent, the constant rate war between Visa and MasterCard irks him.
Visa Canada plans to up assessment fees by one-third in April.
“They tend to try to outdo each other and unfortunately we don’t know when they’re going to be done,” he says.
At the moment, businesses are not permitted by credit card companies to charge a fee to accept the cards, but they can for debit.
As a solution, Kelly suggests business owners join a CFIB awareness campaign to sway customers to pay using cash or debit.
The federation has a sign on its website explaining to consumers the effect paying with credit has on smaller merchants.
Kelly recommends merchants print it and display it.
But not all business owners are comfortable directing their customers’ method of payment.
“It’s the worst experience for a customer to make them feel bad for having to use their credit card,” MacDonald says.
“It’s hard because I don’t want to prevent people from shopping in my store, so I don’t want to sway them away from using a credit card,” Martin says, “but if there’s an option for us to get into the conversation then I definitely try to steer them subtly towards cash or debit.”
Kelly says the campaign isn’t for everyone, but it is one way to help avoid the added costs.
In December 2010, the federal Competition Bureau asked the Competition Tribunal to rule on whether Visa and MasterCard are engaging in anti-competitive behaviour.
The tribunal was supposed to make its ruling in December. A decision is expected soon.