The dispute is complex. But Corinne Pohlmann, vice-president of national affairs for the Canadian Federation of Independent Business, summed it up this way: "The issue is power. And now all the power is with the credit card companies."
Essentially, retailers claim they are compelled to share the cost of the rewards programs used by banks and credit card companies to tempt consumers into choosing one credit card over another.
The banks and credit card companies like to claim that these rewards are "free." But they are not free. They might amount to a reward worth less than one per cent of purchases made with the card. But still, the rewards add up to a lot of money.
Part of the cost of these rewards comes from annual fees charged by banks and credit card companies to users of some premium cards. Part probably comes from the high interest charges levied against credit card holders who fail to pay their bill in full each month.
Retailers believe they are also unfairly having to fork out part of the cost of these rewards. They say the fees they pay to credit card companies have soared in recent years, as popularity has grown among consumers for cards that offer "free" rewards.
Fees paid by retailers for the convenience and extra business generated by credit cards can be as high as four per cent of the purchase price, according to retailers. On any $100 purchase, as much as $4 comes out of a retailer's profit and goes straight to the credit card company.
Big retailers may be able to negotiate lower fees with the banks and credit card companies, retailer industry representatives say. The fees can be as low as 1.5 per cent of the purchase price, they say.
Typically, retailers pay as much as two percentage points more to a credit card company on a purchase made with a card with an enriched consumer rewards program, industry insiders say.
The giant Costco shopping club attracted attention recently when it opened its first gas station in the Ottawa area, on Hunt Club Road near Merivale Road. In the first few weeks, at least, Costco offered prices that were between two and four cents lower per litre than many competitors. Costco does not accept Visa and MasterCard for payment. The shopping club's members can only buy gasoline with a debit card or with an American Express credit card.
David Wilkes, vice-president of the Retail Council of Canada, said payments by retailers to credit card companies are now "substantially higher" than they used to be, "with no discernible benefits to the retailer." He said in an interview that fees to retailers do not accurately reflect the cost to the credit card company.
Some retailers would like to introduce a surcharge for payment by credit card, to cover the costs of accepting the card as a means of payment. The federal government is studying the idea. Such a move is being strenuously resisted by the credit card companies.
Melissa Cassar, a spokeswoman for Visa, told OBJ: "Visa's no-surcharge rule was created specifically to protect consumers from retailers who seek to impose checkout fees and penalize consumers who choose the convenience, security and reliability of credit cards over cash and cheques."
Australia and Britain are among the countries that permit retailers to slap a surcharge on payments by credit card, said Ms. Cassar. She added: "Evidence indicates that many large retailers profit from the fees by shifting the cost of doing business onto consumers."
But what is wrong with a retailer passing on all his costs? That's what any business normally does.
There are benefits as well as costs for retailers who accept credit cards. There's more business, for a start. There are fewer bounced cheques and counterfeit bills. There are fewer trips to the bank with money from the till. The chances of a robbery are reduced because there's less cash on hand to steal.
While a retailer is not at present technically allowed to put a surcharge on a credit card payment, the retailer is free to offer a discount for cash. But very few do.
The reason for this is probably because a discount of two to four per cent - the dealer's cost of accepting the credit card for payment - doesn't seem like much, if you're a consumer used to sales and 40-per-cent-off deals.
The challenge for retailers is to show convincingly that credit card companies are hitting them with costs that should be borne by those paying by credit card.