The Canadian government took a significant step to support small and medium-sized businesses by announcing major reductions in credit card processing fees. The initiative, which took effect on October 19, 2024, aimed to ease the financial burden on over 90 percent of businesses that accept credit card payments.
The Role of Small Businesses
Communities across Canada now have well-paying jobs thanks to small and medium-sized businesses. These companies exemplified the spirit of entrepreneurship that sustained local economies and lively main streets. These businesses were acknowledged by the federal government as vital to economic growth and community development. Their accomplishments were essential to preserving the country’s diverse and robust economy.
Understanding Credit Card Fees
In the past, small business owners faced a lot of difficulties with the credit card fee structure. The interchange charge, which was paid to the financial institutions that issued credit cards, made up the majority of these payments. Processing credit card payments from customers came at a significant expense to small firms.
New Agreement Details
In order to lower fees for small businesses, the federal government was able to strike deals with major credit card firms. For in-store transactions, the new structure set an annual weighted average interchange rate of 0.95 percent. A 10 basis point reduction in online transaction fees resulted in savings of up to 7%.
Impact on Small Businesses
Over 90% of Canadian businesses that take credit cards were impacted by the charge reduction scheme. Reductions of up to 27 percent in interchange fees were advantageous to small business owners. Over a five-year period, the program offered qualifying businesses significant cost reductions.
Real-World Savings Example
A practical example demonstrated the substantial impact of these fee reductions on business operations. A store processing $300,000 in annual credit card payments previously paid approximately $4,000 in interchange fees. Under the new agreement, this same business could save $1,080 annually.
Code of Conduct Updates
The government introduced a revised Code of Conduct for the Payment Card Industry to protect businesses accepting card payments. Effective October 30, 2024, the new code improved transparency in pricing comparisons between payment processors. Complaint handling response times were reduced to 20 business days, an 80 percent improvement.
Carbon Rebate Integration
The government announced the Canada Carbon Rebate for Small Businesses alongside the fee reduction program. This initiative allocated over $2.5 billion to approximately 600,000 Canadian businesses. The program structured payments based on business size and location across different provinces.
Provincial Distribution
The carbon rebate program offered varying payment amounts across different provinces and territories. Ontario, Alberta, and Saskatchewan businesses received specific allocation amounts based on their employee count.
Support for Online Operations
Small businesses were given free access to online security tools and services, and the new agreements contained provisions for cybersecurity and fraud prevention measures. The project was designed to assist businesses in safely growing their online presence.
Implementation Timeline
The new scheme began on October 19, 2024, when the credit card fee reductions went into effect. Soon later, on October 30, 2024, the Code of Conduct was amended. By April 30, 2025, technical implementations were expected to be finished. For every facet of the initiative, the government set a precise deadline.
Industry Cooperation
The program’s success relied on cooperation from multiple stakeholders in the payment industry. Major credit card companies agreed to implement the reduced fee structure, and payment processors were expected to pass savings directly to small businesses.
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