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The true cost of credit card reward programs (and more)


Our Bottom Line Panel got the band back together for a segment on the ins and outs of credit cards on The National with Peter Mansbridge on CBC tonight. They’re in the news because a competition tribunal that many had expected to conclude that current practices were uncompetitive (not allowing merchants to pass credit card transaction fees as surcharges to consumers, and not allowing merchants to refuse premium cards that have higher transaction fees), didn’t in fact do that.

For a primer on the reason for the tribunal, you can click here to read a column I penned on the matter last summer.

Our panel, consisting of Patti Croft, Jim Stanford, Amanda Lang, and myself (and moderated by Mr. Mansbridge) explore some of the issues surrounding hidden credit card fees, anti-competitiveness, reward programs, and the general pros and cons of credit cards. I think there is some great eye-opening information on credit cards here for everyone. Enjoy!

Related posts:

  1. Charge Cards versus Credit Cards
  2. Credit Card Interest of 1.97% for 6 Months with PC Financial
  3. Credit Card Balance Protection Insurance Costs You Even If You Pay Off Your Balance

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About Preet

Preet Banerjee is a Canadian personal finance commentator. He is a television host for The Oprah Winfrey Network, a Money Expert for The W Network, a personal finance columnist for The Globe and Mail, and a regular panellist on CBC's The National with Peter Mansbridge. He also appears frequently as a guest commentator on a variety of other programs and media.


  1. Preet: Canadian Federation of Independent Business (CFIB) lists the merchant processing fees by specific credit card (organized by card issuer) on their website. Merchant fees are as high as 2.71% for premium rewards cards like the BMO World Elite MasterCard and the CIBC Driver’s Edge World MasterCard.

    Global technology companies Visa and MasterCard, as well as the financial institutions that issue credit cards (and that reap 80% of the merchant processing charge in the form of an interchange fee) appear to be the big winners from the tribunal’s decision — at least in the immediate term.

    Do you see any benefits to consumers from the tribunal’s decision to maintain the current status quo?

    Had the tribunal decision allowed merchant surcharges, do you think that would have significantly decreased the use of rewards cards?

  2. Herb Roblin says:

    The one point that you didn’t touch on in that CBC piece was the fact that the merchant has no idea, at the time of the transaction, how much he is going to be charged by the card processor. Other than Amex, whose rates are even more ridiculous than Visa and Mastercard, I have not seen any charges of more than 3% from my card processor (Meloche Monnex). If I know, as a retailer, that my cost of accepting credit card payment is going to be 1.5% then I can build that into my pricing however I have not seen a Visa or MC card charge at that rate for a couple of years.

  3. Robb says:

    Great discussion here, Preet. I do feel for the mom & pop shops who have to incur higher fees but I’m certainly not shedding a tear for giants like Walmart and Safeway who have the power (and sales volume) to negotiate lower fees.

    The CFIB has done a good job making us feel bad for the retailers here, but small corner stores make up a tiny fraction of these transactions.

  4. Justin says:

    I don’t take issue with this piece in general. However, one statement struck me: “There shouldn’t have to be an electronic transaction for that [small purchase].”

    There is always an electronic transaction. If I don’t use my credit card ( Visa secures the transaction much more-so than the bank) or debit card at the register (for which I pay a monthly fee for a limited number of uses, and a per use fee beyond that) then I am using my card to get the cash from an ABM (which is subject to roughly the same fees as the debit card purchase). The bank is winning, regardless, and the consumer is paying the most, while the businesses are in the middle, able to pass some of the costs along.

    • Preet says:

      A good point. I know of only one person who routinely gets his cash by lining up in the branch, but being able to make withdrawals at your bank’s ATM network does soften that blow. It’s amazing how many people don’t strategize their cash withdrawals (making small withdrawals when not using their own bank’s ATMs, etc.)


  5. David says:

    For me the real issue is that merchants are blocked from giving discounts to those who pay cash. How is this not a
    constraint of trade? These card companies, like our banks, are nothing less than an oligopolies whose members have been given licence by government to “steal with the pen.” Nothing short of piracy !

  6. Troy says:

    You make some great points here. Like Robb, I feel sorry for the small businesses. They have it hard enough already, not to mention that the big guys like Visa and Mastercard aren’t helping them.