Five things about the fees charged to merchants for accepting credit cards

OTTAWA – Five things to know about the fees charged to merchants that accept credit cards:

How the fees work: Merchants are charged a percentage of the total transaction. For example, if you buy a set of pots and pans that costs $100 and the fee is 1.5 per cent, the store is charged $1.50 and keeps $98.50 from the sale.

What’s included in the fee: Payment processors charge stores, restaurants and other merchants what is called the merchant discount rate. That rate includes the so-called interchange fee set by the credit card company. The interchange fee is paid between banks for the acceptance of credit card-based transactions.

Not all cards are the same: How much merchants are charged varies depending on the type of credit card. Stores are charged one rate for basic credit cards, but if you use a premium card like Visa Infinite or World Elite MasterCard that gives reward points or other benefits, the rate is higher.

Not all purchases are the same: The amount merchants are charged can also vary depending on their business. Gas stations and grocery stores are charged different rates than other types of merchants. The fees can also be different if you’re purchasing pots and pans online or by telephone than if you actually purchase them in the store.

Code of conduct: The federal government updated the code of conduct for the credit and debt card industry last year. The changes made it easier for merchants to opt out of their contracts if their payment processor raises rates or doesn’t pass on savings from Visa and MasterCard. The code also applies to mobile payments, and placed a six-month limit on the auto-renewal of contracts with payment processors.