Tag Archives: merchant fees

Walmart Wants to Stop Taking Your Visa?

Walmart, the worlds’ largest retailer announced last week that they’re kicking out Visa in Canada. But I doubt that’ll happen.

Walmart claims they pay over $100 million in merchant discount fees. Those are the fees charged by credit card issuers when you use your credit card for payment. These amount of these fees depends on how much business a retailer does on credit cards. With MasterCard, for example, it’s as low as 1.26% when there’s $3 billion in business a year. Mine, on the tiny business side is 2.75% with Square.

There are over 72 million Visa and MasterCards in Canada, according to the Canadian Bankers Association. Ballpark, 60% are Visa cards, so I doubt this will come to pass. I just can’t see it happening. The average credit card charge in Canada is $103 and the typical Walmart customer isn’t likely to just switch to using their debit card, instead. The “no more Visa” plan is supposed to start rolling out July 18th in Thunder Bay. OK, they didn’t exactly pick the city with the largest volume business in the country. And they made it effective six weeks out. That means we’ll just have to see who blinks first: Visa in lowering the fees for Walmart, or the retailer in realizing this isn’t a winning idea.

Are Credit Card Surcharges Coming?

If you’ve ever been at a U.S. gas station you’ve seen the double pricing signs: One price for cash and another for credit cards. It looks like that’ll come to Canada soon.

Retailers pay between $5 and $6 billion in merchant fees to accept credit cards. It’s part of their cost of doing business, and you have to know a ton of that is included in their pricing. Now they want the right to charge extra if you’re paying by credit card. In other words, they want you to pay the 2 to 3% discount they have to absorb.

It started in the US in the mid 2000’s with lawsuits against Visa, MasterCard and American Express. There, just like in Canada, when a merchant signs up for credit card acceptance, they agreed not to surcharge, and to treat credit cards as cash. This is a restriction that ended in the U.S. just last year. And remember what I keep saying: What happens in the U.S. comes to Canada sooner or later.

Credit card issuers want to make money, retailers want to make money, and you want the points, perks, or free toaster. Credit card companies keep adding annual fees and compete to get into your wallet with more perks. How do they make even more money? Different credit cards with increased perks, but also increased annual fees AND higher merchant fees. The Visa Signature card, for example has a much higher merchant rate than normal cards. I’m just setting up a U.S. merchant account and those cards increase my discount charge by over 50% compared to others.

Should I have the right to refuse the card or to surcharge you if you want to pay with it? Of course! Should Visa or MasterCard be telling me what I can and cannot charge? Of course not! It just becomes a challenge for any retailer who wants the business but not all the increased backdoor costs that you don’t even know exist! You might not be happy with that answer, but you do have the right to pay with another card, to pay cash, or by debit card.

Eight Financial Legislation Changes That Would Really Help Us

Recently NDP leader Jack Layton held a press conference here in Edmonton to put the spotlight on credit card issuer. Mr. Layton comments focused on the high merchant fees and on credit card interest rates.

He’s half right, and half off the mark. The merchant fees that retailers have to pay in order to accept credit cards average around two percent. In addition, there are also a ton of other fees which add up to another one or two percent. They’re not optional, because it’s impossible for a retailer not to accept credit cards, they keep rising, and they are certainly built into the retail price of what you and I pay.

The issue of credit card rates is another matter. I’m always hopeful that Mr. Layton will use the massive media attention he can draw in a positive and constructive way. But, once again, I was disappointed. Two years ago, Mr. Layton called for the elimination, or drastic reduction of ATM fees. Sorry, but an ATM fee is a “lazy fee,” as we discussed at the time. Nobody has to pay them, if they just go another two or three blocks to their own bank machine where there’s never a charge.

Mr. Layton wants the government to force financial institutions to have at least one credit card at prime plus 5%. Sorry, but with write offs and other costs, that can’t happen, and won’t happen. But then, for anyone carrying a balance, there are cards with 11% rates out there. If you are going to carry a balance, it’s a quick fix to change from a 20% card to the low-rate card. Forget the perks and points. Most are never claimed in the first place, the worst of which are airline miles. where Consumer Report found that over 75% are never redeemed.

There isn’t a law that says you HAVE to use your credit card. It’s your choice and it’s one of the most expensive ways to finance things.

If you carry a credit card balance – stop using it until it’s paid off! Broke people can’t keep spending! We’re at 150% debt to net income – and it’s getting worse, and we’re now more broke, and saving less, than Americans! No law Mr. Layton may want to pass will stop broke people from continuing to dig their financial hole deeper and deeper.

Needless to say, I would do anything to get one-one hundredth of the media attention Mr. Layton can garner to make a difference in financial education and to actually help families. Mr. Layton missed a great opportunity to shine the spotlight on financial issues that matter and that can, and should, be addressed.

How about some legislation that Universities and Colleges can’t sell their student lists to credit card issuers? It’s our educational institutions selling out their students for a kick-back.

How about that you actually need a job to get a credit card, and preventing them from being issued to students until age 21 and with proof of an actual income?

How about changing the giant rip off of mortgage insurance with CMHC? CMHC has $8 billion in net assets and made almost a billion dollars in 2009. Yet we have to pay the insurance on less than 20% down payments. In the U.S. it’s monthly premiums until you do reach the 20% equity. At that point, the premium charge stops.
Here in Canada, it’s entirely front loaded, and adds $14,000 to $18,000 in costs to the average mortgage.
How about re-starting Bill C27 that died, making it a criminal offence to steal someone’s identity, with up to five years prison?

How about a credit freeze law that allows individuals to totally block their credit report, making it impossible to be the victim of identity theft? Because it’s the ONLY way to accomplish that.

How about legislation that forces financial institutions to advice customers when their transaction will trigger an overdraft with huge fees? This opt-in rule would be a no-brainer in having an ATM screen display that you are about to go into overdraft with this withdrawal.

Better yet, how about matching the U.S. legislation that requires customer consent before every allowing an overdraft? That way, people can’t be trapped into huge overdrafts they never consented to.

And back on credit cards, how about restricting the $30 or $40 over-limit fees to a percentage of the balance, or requiring specific customer permission before over-limiting the account in the first place? Right now, a $2 coffee can trigger a $30 overdraft.

How about championing a consumer bill of rights, including the right or ability to speak to a human being at the credit bureau with inquiries, or concerns about their credit file. Because, right now, one-third of files have errors serious enough to prevent obtaining credit.

Those are eight reasonable and reasonably simply issues that can be passed through the House of Commons and become legislation. Unfortunately, they are certainly not as sexy as talking about ATM fees, or mandated low-interest credit cards. But then, is it about cranking people up, or wanting to help and make a difference?

Some pre-Christmas Good News Stories

It only seems appropriate at this time of the year to focus on some good news in the world of finances and credit. So, in no particular order, here are eleven positives that are worth sharing or repeating:

Credit & debit cards: This was the year that our volume on debit cards exceeded that of credit cards. And according to a study just released, our raw charge volume on credit cards is also down 12% to the end of September. It’s always great news when we spend money we have, instead of borrowing it!

Mortgage rates: If you refinanced, you already know that you got some of the lowest rates in a generation – even more if you negotiated properly. And it looks like those low rates may stay for another three or six months. We’ll talk about that in January with some critical things you need to know and get ready for.

Just released is a Harris poll: In the current slowdown, or tail-end of the recession, two-thirds of us still intend to decrease our already reduced restaurant and entertainment spending. Put that together with this morning’s Bank of Canada release that our savings rate is 4.7%, and I’m very happy that we’re saving more and spending less.

In that same vein, using the slogan of one of the big no-service banks, you’re richer than you think, our net worth increased by $141 billion in the second quarter of the year. It is also expected to be the same or more for the third quarter, as our retirement savings and investments bounced back big-time, and home values started to creep up again. Don’t make that out to be permission to spend stupid again, but it’s great news when our savings, homes, and investments grow.

Let’s face it, gas prices are a big dent in our wallets each month. Last week, the government owned Mexican oil monopoly paid $1 billion to hedge prices for 2010 at a $57 a barrel level. They didn’t buy oil, they bough insurance contracts that they’d get at least $57 a barrel. Since it’s in the $70 range right now, it looks like some very smart producers think there’s about a 20% drop coming next year.

Some potential good news is that the federal government is looking into the huge fees that merchants, and ultimately you and me, pay on credit and debit card transactions. IF they have the guts to act, it’ll help us all, as merchants will more than likely pass on the fee savings in a prteey competitive climate.

If you remember, in October we talked about almost two-thirds of us living paycheque to paycheque, and that being broke is a choice. At that time I offered to work with anyone who is sick and tired of being broke. So right now, there are three families in Kelowna who are on the way to becoming debt free and a special shout-out to them.

The recession appears to be over, at least on paper, in the U.S. and here in Canada. The great news is that we dodged a big bullet and didn’t have nearly the collapse the U.S. had, and continues to have. Even better news is if, and that’s a big if, we learned the painful lessons of millions of Americans, and a ton of business that went under: Debt doesn’t pay, you cannot borrow your way to wealth, and too many payments will collapse your finances sooner or later.

One financial obligation most of us have is our cell phone. The great news is that three new second-tier cell phone companies are starting up in the New Year. Guaranteed, that’ll result in a big drop in our cell contracts. If your contract is up, or about to expire, do NOT sign another three year contract and get trapped. Leave it month by month until these three are in the market. In Canada, we are way overcharged on our cell bills. In the U.S. right now, it’s $40 a month for unlimited long distance, unlimited calling minutes, and texting! Compare that to your bill. Now, if you have an I-phone, I can’t help you – you can afford a phone that’s ten times more than my monthly bill, and you’re not going to get a break.

Can it be good news that some people are going to jail? You bet. There were a number of late-night infomercial people that finally got charged. They’re off the air and no longer conning people. I’ll share some of the details with you in January.

Cash-back from your banking: Last week, millions of us received our profit sharing from the credit unions we deal with. Great news all around: Great service, you’re a member/owner, better rates, AND profit sharing. Mine was just under $400 out of $42 million from Servus Credit Union. In the Okanagan, Interior Credit union shared $4 million with 30,000 members.

I wish you a very merry Christmas, focused on the real spirit and meaning of Christmas!

George Boelcke, CCP