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Canadian Merchant Credit Card Surcharge Programs | Rescue

Sarah Janssen

Account Lead


In today’s rapidly evolving business landscape, understanding credit card surcharges has become more crucial than ever. As small and medium-sized businesses increasingly rely on digital transactions, navigating the complexities of credit card processing fees and surcharge programs is vital.

But why is this knowledge so important? For one, it directly impacts your bottom line. Every credit card transaction comes with associated fees, which can eat into your profits if not managed properly. By understanding credit card surcharges, you can make informed decisions about whether to absorb these costs or pass them on to your customers in a way that’s both legal and fair.

Moreover, informed decisions about surcharges can enhance customer relationships. Transparency in pricing and fees builds trust and loyalty, ensuring customers feel valued and fairly treated.

This guide aims to demystify the concept of credit card surcharges for small and medium-sized businesses. We’ll explore what these surcharges entail, how they differ from other types of fees, and the legal and practical considerations of implementing them in your business. Whether you’re a seasoned business owner or new to the game, understanding these aspects is key to making smart, cost-effective decisions that benefit both your business and your customers.

What is a Merchant Surcharge?

A merchant surcharge, often referred to as a credit card surcharge, is an additional fee that a business may choose to add to a customer’s bill when they opt to pay with a credit card. Surcharging allows merchants to drastically reduce or even eliminate their cost of processing a credit card. This practice has become increasingly common as businesses seek ways to offset the fees charged by credit card companies for processing payments.

The Mechanics of Merchant Surcharges

If a merchant in Canada wishes to accept payments via credit card or debit card, they must apply for and have a merchant account. This merchant services account, tied to a credit card processor, is linked to a payment terminal (physical or virtual) which secures and facilitates the transaction for a merchant. When a customer pays with a credit card, the merchant incurs a fee from their payment processor. Merchants refer to this as their credit card fees. The largest component that makes up these credit card transaction fees, known as interchange fees, vary and range between 0.92% to over 3% of the transaction amount. A credit card surcharge is essentially a way for businesses to pass on the cost of accepting credit cards to their customers. In Canada, the surcharge percentage is capped at 2.40% for credit cards. This means, for a purchase of $100, a customer will pay an additional $2.40, if the merchant implements a surcharge. For customers that opt to pay with a cash or a debit card, instead of a credit card, they will not incur the fee.

Surcharge Fees: Defined and Regulated

A surcharge fee is an extra charge added specifically for credit card payments. This fee is typically a percentage of the transaction amount and is levied to cover the cost of credit card processing fees. It’s essential for merchants to know:

  • Eligibility: Not all businesses or locations are eligible to apply surcharge fees. For instance, surcharge fees are not permissible in Quebec.
  • Limitations: Where allowed, the surcharge fee cannot exceed the actual cost of credit card processing, in Canada this is capped at 2.40%.
  • Disclosure: Merchants must clearly inform customers about the surcharge fee before the transaction is completed, often through signage at the store or a statement on the website.

Both surcharge and convenience fees are subject to legal and card network regulations. Misapplying these fees can lead to hefty fines and backlash from both customers and credit card networks. Therefore, it’s essential for businesses to:

  • Stay Informed: Regularly check for updates in laws and regulations regarding these fees.
  • Be Transparent: Always inform customers clearly about any additional fees they might incur.
  • Consider Customer Experience: While these fees can offset operational costs, consider how they impact customer satisfaction and loyalty.

In conclusion, understanding the differences between surcharge and convenience fees, along with their respective regulations, is vital for businesses. It not only ensures compliance but also aids in maintaining a positive relationship with customers.

Impact on Consumer Purchases

For consumers, merchant surcharges can slightly increase the cost of their purchases. This can influence buying behavior in several ways:

  • Cost Transparency: Customers appreciate knowing the exact cost of a transaction upfront. Surprises in the form of added fees at the point of sale can lead to customer dissatisfaction.
  • Payment Method Choices: Knowing that a surcharge applies, consumers might choose alternative payment methods, like cash or debit cards, to avoid the extra fee.
  • Perception of Fairness: Some consumers might perceive surcharges as unfair, especially if they are used to merchants absorbing credit card processing fees. This can impact their overall experience and loyalty to the business.

It’s important to note that not all regions allow merchant surcharges, and where they are permitted, there are often specific rules and limits. For instance, the surcharge amount typically cannot exceed the actual cost of processing the credit card payment, and merchants must clearly disclose the surcharge before the transaction is completed. Currently in Canada, all provinces allow for the addition of a surcharge, and the passing of fees onto customers, except Quebec.

While merchant surcharges offer a way for businesses to manage expenses related to credit card transactions, they also carry implications for customer experience and satisfaction. Balancing these factors is key to implementing surcharges in a way that is both financially sound and customer-friendly.

Full Disclosure of Surcharges and Fees

For Canadian small and medium-sized businesses, transparency in financial transactions is not just a best practice, but a necessity. When it comes to applying surcharges and additional fees for card payments, full disclosure to your customers is imperative.

Why Clear Communication Matters

When a customer approaches the point of sale or finalizes an online purchase, they should be fully aware of all costs involved. This includes any surcharges or additional fees that apply when they choose to pay with a credit card. Here’s why clear communication is crucial:

  • Informed Decision Making: By informing cardholders about any extra charges in advance, you empower them to make informed decisions. They can choose to proceed with the transaction, switch to a different payment method like debit or cash, or even cancel the transaction if they prefer.
  • Building Trust: Transparency in pricing and fees fosters trust between your business and its customers. It demonstrates your commitment to honest business practices and enhances your reputation.
  • Compliance with Regulations: In Canada, regulations require businesses to disclose any additional fees upfront. Failing to do so could lead to regulatory issues and damage your business’s credibility.

Best Practices for Disclosing Surcharges and Fees

To ensure you’re communicating these fees effectively and in compliance with card brand regulations, consider the following best practices:

  1. Visible Notices: Display clear signage at the point of sale and on your website, informing customers about potential surcharges and fees. This should include the exact surcharge amount or percentage. Place signage at the point of sale as well.
  2. Early Disclosure: Ensure that any extra fees are disclosed early in the transaction process, ideally before the customer begins the payment process.
  3. Educate Your Staff: Train your staff to understand these fees and how to communicate them to customers. They should be prepared to answer any questions customers might have.
  4. Online Transparency: For online transactions, include information about surcharges and additional fees on the checkout page, before the customer submits their payment.
  5. Offer Alternatives: Clearly state that customers have the option to use alternative payment methods like debit cards or cash to avoid the surcharge.
  6. Receipt Details: Ensure that the receipt clearly itemizes the surcharge or additional fee separately from the product or service cost.

By adopting these practices, Canadian small and medium-sized businesses can navigate the landscape of credit card surcharges and fees while maintaining a strong, trust-based relationship with their customers.

What are the Merchant Surcharge Rules in Canada?

For Canadian small and medium-sized businesses, understanding the ins and outs of merchant surcharge rules is crucial. It’s not just about adding an extra fee; it’s about adhering to specific regulations and guidelines that govern how these surcharges can be applied. Let’s delve into the key features and rules of Canada’s Merchant Surcharge Program.

Understanding Canada’s Merchant Surcharge Landscape

In Canada, the ability to add a surcharge on credit card transactions comes with specific rules and limitations. These guidelines are designed to protect both the merchant and the consumer, ensuring transparency and fairness in every transaction. Let’s look at the key features when a merchant chooses to charge.

Key Features and Rules:

  1. Permitted Surcharges: In Canada, merchants may apply a surcharge to credit card transactions. This has become increasingly relevant with the growing use of credit and debit cards, and the associated processing costs.
  2. Surcharge Caps: The surcharge amount is capped at 2.40% and cannot exceed the cost incurred by the merchant for processing the credit card payment. This ensures that merchants do not profit from the surcharge but simply cover their expenses.
  3. Disclosure Requirements: Merchants must clearly disclose any surcharge to the customer before the transaction is completed. This can be achieved through visible signage at the point of sale, notices on websites for online businesses, and verbal communication during transactions.
  4. Card Network Compliance: Merchants must comply with the regulations set by major card networks like Visa and MasterCard. These networks have specific guidelines on how and when surcharges can be applied.
  5. Consistency Across Payment Methods: If a merchant decides to apply a surcharge, it must be consistent across all types of credit card transactions. This means the same surcharge rate should apply whether the card is swiped, inserted, or used online.
  6. Record Keeping: It’s important for merchants to maintain records of the surcharge fees and the associated credit card processing costs. This can be crucial for auditing and compliance purposes.
  7. Customer Awareness: Educating customers about why surcharges are being applied can go a long way in maintaining good customer relations. It helps in clarifying that the surcharge is meant to offset credit card processing fees and is not an additional profit for the merchant.

Implementing Surcharges Responsibly

While implementing surcharges can help offset the cost of processing credit and debit card transactions, it’s vital for merchants to do so responsibly. This means adhering to the regulations, being transparent with customers, and considering the impact on customer experience and loyalty.

By understanding and adhering to these rules, Canadian businesses can effectively manage the costs associated with accepting credit cards while maintaining trust and transparency with their customers.

Can you Surcharge any Card Transaction?

Merchants often ask if they have the ability to add a surcharge to any card transaction on their payment terminal. In short the answer is no.

Can I surcharge both Credit and Debit Cards?

All credit cards in Canada can have the surcharge applied. This applies to transactions done in person as well as online. Debit cards on the other hand, cannot have a surcharge applied. This goes against the card brand rules for surcharge in Canada.

Can I surcharge a prepaid card?

No, card brand rules do not allow for a surcharge to be applied to prepaid cards.

Why Rescue for credit card surcharge?

In the dynamic landscape of Canadian payment processing, Rescue Payments stands out as a beacon of innovation, compliance, and customer-centric service. Our commitment to offering small and medium-sized businesses a streamlined, cost-effective solution for credit card transactions sets us apart in the industry. Here’s why choosing Rescue Payments is the smart choice for your business.

We are Leaders in Compliant Surcharge Programs

  • Zero-Fee Processing Advantage: With Rescue Payments, embrace the unique opportunity of a zero-fee processing account. Our surcharge program automatically applies a compliant 2.40% surcharge on domestic credit card transactions, effectively neutralizing processing fees for merchants.
  • Full Compliance Assurance: We ensure that every transaction adheres to the stringent compliance requirements, taking the burden off your shoulders. Our system is designed to handle all reporting and reconciliation requirements seamlessly, keeping you in line with regulations without the hassle.

Advanced Android-Based Devices

  • All-in-One POS System: Our state-of-the-art Android devices are more than just payment terminals; they are complete point-of-sale systems. Ideal for various business types, from quick-service restaurants to retailers, our terminals manage menus, inventory, and employee time clocks efficiently.
  • Flexibility in Function: Catering to diverse business needs, our terminals can operate as standalone units for simple payment processing or as full-fledged POS systems, offering flexibility and scalability.

Omni-Channel Payment Processing

  • A Single Solution for All Payment Needs: Whether it’s in-person, online, or over the phone, our omni-channel approach allows you to handle all types of transactions under one unified account. This simplifies reporting and management, offering a cohesive experience for both you and your customers.
  • Contactless Payment Compatibility: Embracing the future of transactions, our terminals are equipped to accept all forms of contactless payments, including Apple Pay and Google Pay, ensuring convenience and safety for your customers.

Unmatched Customer Support and Service

  • 24/7 White Glove Support: Our dedication to customer service is unparalleled. We offer round-the-clock support, ensuring that any queries or issues are resolved promptly and effectively.
  • Hassle-Free Onboarding and Deployment: From the initial setup to the deployment of payment terminals, we handle every step with utmost care, ensuring a smooth transition for your business into the world of advanced payment processing.

Fast and Reliable Funding

  • Next Business Day Funding: Unlike many payment processors, we offer next business day funding. This feature is especially beneficial for smaller or newer merchants who need quick access to their funds.

Our Payment Devices and PCI DSS Compliance

At Rescue Payments, we understand the paramount importance of data security in today’s digital transaction landscape. That’s why the payment devices we provide are meticulously engineered to be fully compliant with the PCI DSS (Payment Card Industry Data Security Standard). This compliance is more than just a regulatory requirement; it’s a cornerstone of our commitment to safeguarding the integrity and security of every transaction processed through our systems. Enhanced Security for Peace of Mind

Robust Data Protection: Our devices are designed with advanced encryption and security protocols to ensure that sensitive cardholder data is rigorously protected during every prepaid card, credit or debit card transaction. This means that when a customer swipes, inserts, or taps their card, their data is securely encrypted, minimizing the risk of unauthorized access or data breaches.

Streamlined Compliance for Merchants: With our PCI DSS compliant terminals, merchants can rest assured that they are adhering to the highest standards of security without having to navigate the complexities of PCI compliance on their own. This compliance relieves merchants from the burden of extensive security measures, as our devices manage the heavy lifting of data protection.

Secure Network Transactions: Our payment devices are engineered to prevent the transmission of unencrypted card data over merchant networks. This ensures that each transaction is not only secure but also isolates sensitive data from the broader network, adding an extra layer of security against potential cyber threats.

Regular Updates and Monitoring: Compliance with PCI DSS is not a one-time event but an ongoing commitment. Our devices receive regular updates to stay abreast of the latest security standards and threats, ensuring continuous protection and compliance.

Building Customer Trust: Knowing that transactions are processed on PCI DSS compliant devices enhances customer confidence. When customers recognize that their data is being handled with the utmost care and security, it fosters trust and loyalty, which are invaluable assets for any business.

A Secure Transaction Environment

Our commitment to PCI DSS compliance is a testament to our dedication to providing a secure, reliable, and seamless transaction experience. By choosing Rescue Payments, Canadian small and medium-sized businesses are not just opting for a payment solution; they are choosing a partner that prioritizes the security and integrity of their transactions, ensuring peace of mind for both merchants and their customers.

Rescue Payments isn’t just a service provider; we are a partner in your business growth. Our innovative approach to surcharge processing, coupled with cutting-edge technology and a commitment to customer satisfaction, makes us the go-to choice for Canadian businesses looking to optimize their payment processing solutions.

Want advice on setting up a surcharge program?

We host weekly live trainings teaching you how to get the most out of your surcharge program, and if you want to get learning right now, you can download our Surcharge Canada Guide.

Download the Surcharge Canada Guide
Surcharge Canada Guide