The large credit card “companies” in Canada have agreed to freeze their “transfer fee” to 1.5% of the sales value, which is suitable for retailers, but I am not sure if it is good or bad for consumers. The transfer fee is the skim the credit card takes every time you purchase a service or product, and the retailer pays it.
This skim can be as much as 3.0% of a sale that a retailer pays (for cards like Amex and other “premium” cards. This fee freeze will help retailers limit their expenses by allowing us the convenience of using Credit Cards for purchases at their store (or services from their firm).
The Canadian Federation of Independent Businesses says the skim adds up to between $5 and $7 Billion a year in costs. Who pays for that? The business has to incur the charge, but they pass on the cost with higher prices for services and products, and this is all so that we can make payments.
The other interesting question is how are the Credit Card providers (i.e. the banks) recuperate the income they will lose with this freeze? The banks will be the ones “subsidizing” this freeze, but they will (no doubt) find a way to either deal with the lost income, or find new income streams to extract the money from consumers (and businesses alike) (that is why I like investing in banks). The banks’ other option is to lower the “Freebies” and “Prizes” they have associated with their Credit Cards. Time will tell how this all works out.