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Canadian restauranteurs express concern over card processor’s ability to make equal or greater profit on card transactions

Garth Whyte

Canadian retailers in the food industry expressed concern in recent letters to credit card companies regarding firms’ ability to make as much, if not more, on a restaurant credit card transaction than the restaurant owner.

The average full-service Canadian restaurant makes 3.7 percent of sales, or $3.70 on a $100 dinner tab. Garth Whyte, the president and CEO of the Canadian Restaurant and Food Services Association, said that the cost for a restaurant to accept a credit card can be as high as three percent of the total bill, as much as $3.96 on the same $100 dinner bill plus $12 in sales tax and $20 for tip, according to The Vancouver Sun.

The calculation is done using the current rates, which are scheduled to increase beginning April 1.

“It is unconscionable for the payment industry to make as much off of a restaurant transaction as the restaurateur who creates local jobs and invests in his or her community,” Whyte said in a letter to Visa, The Vancouver Sun reports. “Adding insult to injury, the upcoming rate increases come at a time when Visa earnings have repeatedly surpassed expectations, prompting your company to double shareholder dividends and buy back shares.”

Ron Orr, the president of the Alliance of Beverage Licensees and owner of several nightclubs and pubs, submitted similar complaints in a letter on behalf of private liquor stores, bars and nightclubs.

“The reality is Visa’s business is not suffering; however, the same cannot be said for many small businesses, including ABLE BC members, here in British Columbia,” Orr said in the letter, according to The Vancouver Sun.

Orr said that credit card fees began to increase in 2010 as consumers opted for premium credit cards that carry higher merchant fees.

Canada has some of the highest merchant fees in the world, ranging from 1.5 percent to more than three percent of purchases.

“We are nearing a point where small businesses will hit the breaking point and won’t be able to afford to take credit cards from our patrons,” Orr said, The Vancouver Sun reports.

The Canadian Federation of Independent Business said that Visa plans to increase merchant fees by one-third, double fees on foreign credit cards and introduce an ultra premium card next fall that carries significantly higher processing fees.

“Consumers believe that the points for their trip to Mexico are free, but they don’t realize that they’ve paid for that flight many times over through these credit card merchant fees,” Dan Kelly, the president and CEO of the CFIB, said, according to The Vancouver Sun.

The CFIB is pushing for the right to add credit card surcharges or refuse high-fee cards, though Kelly said he does not expect many businesses would take advantage of the privileges, which are prohibited in Canada by Visa and MasterCard.

“The important piece is that giving merchants the power to levy surcharges would freak Visa and MasterCard out,” Kelly said, The Vancouver Sun reports. “It would put some water in their wine in considering future fee hikes for merchants.”

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