By Amber Ruddy
Have you seen that Visa ad where a couple at a hockey game pays for a snack using a Visa card? You know, the one that touts the “joy of small”?
Smallenfreuden is a made-up word that is used to describe purchases of $100 or less made on your credit card.
Well there is another side to the story, that of independent business owners.
The Canadian Federation of Independent Business (CFIB) is pushing back and sharing the reasons why you should not use credit for “the small purchases you would make anyway”.
To start, every time you pay with a credit card at your local restaurant, dry cleaner, craft store, or other business, the credit card company pockets as much as two to three per cent of the purchase.
Compare that to using cash or debit. When you use INTERAC, the cost to process the transaction is a flat fee; just a few cents per transaction. Does it really cost more to process the transaction of a stick of gum versus a television set? Or is this a case of the middleman taking a cut?
Banks and card companies bring in a whopping $5 billion a year from credit card processing fees and are looking to grow that by launching into the world of small purchases.
As more uber-premium credit cards hit the market, additional perks including cash back and extra points have to be covered by someone and business owners are the ones picking up the tab.
Currently, there is no way for a merchant to know by looking at the card whether it will carry a regular or high transaction fee.
Hardworking small business owners really feel the pain more than big businesses.
To remain competitive many businesses absorb the cost, but ultimately the merchant may deal with the hidden cost by hiring fewer staff, reducing or eliminating pay raises for employees, and in some cases raising prices.
Businesses are loath to take away options for customers. But it is important to understand how transaction fees can have a major impact on the profitability of many small businesses. Armed with this knowledge, consumers can make informed decisions when they pull out their wallet at the checkout counter.
At the end of the day, biggenbanken loves it when you smallenfreudan. Every time you use credit cards for small purchases, it is definitely hurtenvendors.
Amber Ruddy is the Alberta policy analyst with the Canadian Federation of Independent Business. She may be reached at amber.ruddy@cfib.ca