Today, the Canadian Competition Bureau has just rejected a complaint from retailers about changing the way they pay fees to Visa and Mastercard. I found it interesting to read, as I know that in the States it is illegal in several states for retailers to charge “swipe fees.” It’s almost given that this would never happen in the USA. For now, it seems like points-earning in Canada is still pretty stable.
There are a few things that I thought might be worth mentioning. First of all, every time you use a credit card, the retailer pays an “interchange” fee, which is a percentage of the purchase for credit card acceptance. These range anywhere between 1 to 3 percent. What’s important to note is that premium cards carry much higher interchange fees. So with Visa Infinite (Signature) and World Mastercards, the fee is much higher, arguably because the rewards the cards come with are a higher cost.
The purpose of the complaint in Canada was to limited interchange fees and give retailers the ability to “reject” premium cards. For the miles/points world, this definitely negatively affects our ability to collect points. So I am happy that the complaint got rejected. For now, it continues to mean that competition for the premium card sector will hold steady if not increase, which means increased benefits and rewards for consumers like us.
There are definitely arguments over the prices and how a retailer’s profit margins will be affected, both in a positive and negative way – just look at the legislation that’s present in Australia and New Zealand which limit interchange fees and permits retailers to levy credit card surcharges. That’s right – in Australia and New Zealand you have to pay for the right to use a credit card.
This all lead back to the idea that points are not free – the banks have to pay for them (especially with transferrable currencies), which leads to the bank raising the capital to buy those points from somebody. With premium cards, it’s the retailer that is footing the cost for the points. It’s just very easy sometimes to get absorbed into the “game” that we play and sometimes we have to just take a look back and see that this phenomenon of “travel hacking/points arbitrage” is very fragile, even though there’s a lot to give before the entire system will go kaput.
Definitely, there’s been a lot of change in the credit card market, especially in Canada. There have been a flurry of excellent signup bonuses and some targeted offers with waived fees and it’s always interesting for me to watch the progression of this hobby to see what has happened, and what will happen.
You can read the article here which talks about today’s ruling here.