Interchange and which it is the next new problem for consumer in Canada

Interchange fees are an obscurity to most Canadians, but the impact on consumers is significent. Interchange is a hot political item in Australia and US and that war might be coming to Canada.

reportonbusiness.com: Credit card perks putting the squeeze on retailers

Banks take in an “interchange” fee, which is a percentage of the purchase, each time a customer uses the card. It covers many of the banks’ costs, including any loyalty or points programs they offer.

For Banks interchange is an easy charge because it is charged to the retailer, inside something call the Merchant Discount Fee, every time you use your credit card. In that way the consumer is not directly hit, and that is why you will see some retailers restrict which credit cards they accept.

However the Report on Business reports here that a new war is heating up in Canada, with the Card companies offerring higher end cards with additional loyalty benefits.

Visa Inc. [V-N]
, the dominant player in Canada, has revised its fee structure in
recent months. It’s trying to encourage growth in specific segments,
such as smaller purchases and bill payments. But it’s also trying to
help banks issue new high-end cards that go head-to-head with American Express Co. [AXP-N] , the leader in issuing cards to wealthy business customers.
….

They are geared to people with a family income of $100,000, a personal
income of $60,000, or an annual spend rate of about $30,000. The
company estimates that might be 12 to 14 per cent of Canadians. Many
cardholders are being converted to the new premium cards without having
asked for them, adding to the pressure facing retailers.

The kicker is that those new cards attract higher interchange fees. Witness the Bloor St Diner in Toronto.

Stephen Centner, president of Eatertainment Hospitality Inc., is one of
those feeling the pinch. His company’s Bloor Street Diner in Toronto is
facing a 20-per-cent boost in credit card fees related to Visa
transactions, which would raise his annual payout for all card fees to
about $120,000.

There is only one place that $120K can go and that is higher prices to consumers. This is the interchange problem. The amount merchants are charged is significant.

Mr. Centner says he “sort of freaked out” when his Bloor Street Diner
received a letter notifying it of fee changes. The diner’s merchant
discount rate was rising to 1.86 per cent on each Visa transaction, up
from 1.51 per cent; and 1.56 per cent of each MasterCard transaction,
up from 1.5 per cent. (The merchant discount rate includes interchange
fees).

Why this is big business in Canada.

Canadians held 71.6 million credit cards in 2007, up 9.2 per cent from
the year before, according to the Nilson Report, which tracks the
industry. The number of credit card purchases rose more than 11 per
cent, while the value of goods and services bought jumped nearly 13 per
cent to $261.47-billion (U.S.).

Even though this CNN piece is American the content is highly pertinent to Canadians too. The other items covered are noted below, and likely at least one is useful to you. Good advice.

Deadlines you can’t afford to miss - CNN.com

But when her credit card company changed its statement closing date, she found herself saddled with a $38 late-payment fee.

With billing cycle dates subject to change at any time, and grace periods shrinking, keeping track of credit card billing changes can be a challenge.
….

Nowadays it goes without saying that everything is programmed into a
computer somewhere, and that equally applies to credit cards. The
dates on that credit card statement are critical, and no human is
watching to help you out. You are in charge.

You also have to factor in the time delay between the Bank’s online
banking service getting the funds to your credit card company. The
fastest might be 24 hours, but from my experience, 48 hours - 72 hours
is the norm. That means your ‘pay by’ date on that credit card
statement is at least 2 - 3 days EARLIER than the date on the statement in
order to meet the deadline set by the credit card company.

Bear in mind too that just because you use the online banking service
of the same bank that you got your credit card means nothing. The
systems are no equally integrated at each bank, and in some cases, are
quite separate, so the 48 hours delay still applies there too.

Some other highlights from the CNN piece.

Unexpected triggers

Just because you’re hit with a late payment doesn’t mean there’s no recourse, Arnold says. If you’ve been paying your bills on time and you’ve been a good customer, you can usually get that late fee waived by calling customer service and asking to get the fee removed …..

Financing fees

Retailers may call out to you with promises of “buy now, pay later” offers. But what’s not so obvious is what happens if you don’t pay the balance in full by the due date. Namely, you’ll be socked with heavy fees. …..

Lost ATM/debit card fees

Losing your ATM or debit card is bad enough. But blow past some deadlines, and you could lose your entire savings — and then some …..

Student loans

When it comes to college, paying attention to deadlines can really pay off. [ the other content in this one is specific to US, but the relevance to dates is applicable]