Stephen Harper wants to help consumers, or at least their wallets. His government’s most recent throne speech had several consumer-friendly goodies.
There was a pledge to unbundle cable TV packages so people don’t have to pay for channels they don’t want, and a promise to reduce cellphone roaming costs.
The government also said it would tackle bank fees, which have long perturbed consumers, and credit-card fees, which can range up to 25% interest.
But if the PM wants to come to the aid of consumers, he should also look at the hidden swipe fees of premium credit cards. These fees are causing headaches for grocers.
Few consumers, meanwhile, are even aware of the costs, and are even less aware of how fees may impact the prices of goods. It’s a consumer issue that needs to be addressed.
Some grocers still don’t grasp the impact that swipe fees have on their bot- tom line. Let me explain: On an average grocery order of $100, if the customer pays with an Interac debit card, the cost to the retailer is only about three cents. Reasonable.
But if the customer pays with a “premium” credit card (such as some of the new credit cards that are being issued by the banks), the cost to the retailer can be as much as $3, and maybe more as new premium cards are introduced.
By “premium” I mean cards that offer airplane seats, online shopping using points or other benefits. A charge of $3 or more immediately wipes out your profit on that $100 order and puts you in the red by at least $1 and maybe even $1.50.
Clearly, it’s vital that grocers know the cost of accepting these credit cards. If your volume is high enough, or if you belong to a group, you can negotiate a reduced fee. But as I said, a premium credit card could cost you $3 or more on every $100 order.
Some grocers have looked at placing a surcharge on premium credit-card purchases to cover their losses. Others don’t like the idea because it might make their prices seem higher than the competition’s.
Current credit-card agreements don’t permit retailers to up-charge. But many convenience stores have made customers pay a surcharge by automatically inputting an amount in their terminals.
But that won’t work for grocers who have to deal with cash, standard credit cards, debit cards and the new premium cards.
The Competition Bureau has tried to deal with the problem. It brought a case before the Competition Tribunal in which it argued that fees paid by retailers in Canada are among the highest in the world, adding about $5 billion to consumer costs every year.
The bureau said fees are particularly harmful to small and medium-size businesses. But the tribunal dismissed the case this summer, concluding that only new government regulations could deal with the matter. Yes, regulations are required.
With the Tories’ throne speech fresh in mind, four groups–the Retail Council of Canada, the Canadian Federation of Independent Grocers, the Canadian Convenience Stores Association and the Canadian Independent Petroleum Marketers Association, are pushing for Ottawa to intervene.
“Canadian consumers and retailers are tired of hidden fees,” Diane Brisebois, RCC’s president pointed out recently. “Simply telling people how much they are being overcharged for credit-card fees does not solve the problem. We need real action to address this issue.”
One answer is to look abroad and see how other countries handle credit-card fees. In Australia, for instance, a separate body is in place that sets the rates on fees.
“We would like to see a similar mechanism established here in Canada,” says Gary Sands, vice-president at CFIG. “Rather than pick a rate out of the air, what we think is more important is to have a process by which rates are set.”
The Canadian government must take this issue seriously and deal with it. Grocers should not, and cannot, be forced to take a loss on their sales, and consumers need to be told that their credit-card fees are causing the prices they pay to rise.
No more waiting, Ottawa!
George Condon is Canadian Grocer’s consulting editor