Credit cards have long been a popular method of payment for Canadians, not only for the convenience they provide but also for the rewards they offer. From cashback to travel points and gift cards, Canadian credit card users often find themselves weighing the pros and cons of swiping their cards for everyday purchases. In fact, Canada boasts the highest credit card penetration rate globally, with approximately 83.4% of Canadians aged 15 and older owning a credit card as of 2025. However, there’s a growing trend that may make consumers think twice: the Pass-the-Fee model.
So, the question is: Is it worth paying a surcharge to earn rewards? The answer depends on a variety of factors, from the size of the purchase to the type of rewards program you’re using. In this article, we’ll explore when paying these surcharges makes the most sense and examine a few unique considerations that can help you decide.
What Are Credit Card Surcharges in Canada?
A credit card surcharge is a fee that some businesses apply when you choose to pay using a credit card instead of an alternative payment method like debit or cash. These surcharges are intended to offset the transaction fees that merchants pay to credit card companies.
In Canada, the additional fee sits at approximately 2.4% of the transaction, but this can vary depending on the business. Service industries or businesses dealing with larger transactions are more likely to apply this. Importantly, the rules around passing this fee are different across provinces. For example, Quebec has prohibited surcharges, while other provinces allow them but have imposed specific rules about how they must be disclosed.
How Credit Card Rewards Work in Canada
Before deciding whether it’s worth paying a surcharge, it’s essential to understand how credit card rewards work in Canada. Credit card companies offer various reward programs, typically falling into three categories:
- Cashback: These programs offer a percentage of your purchase back in cash. Common cashback cards, such as the Scotiabank Momentum Visa Infinite, can give you anywhere from 1% to 4% back on specific categories like groceries, gas, or recurring bills.
- Travel Points: Some credit cards, like the RBC Avion Visa Infinite and TD Aeroplan Visa Infinite, offer points that can be redeemed for travel-related expenses such as flights, hotel stays, or car rentals. These programs tend to offer higher returns if points are used for travel rather than general purchases.
- Gift Cards and Merchandise: Some rewards cards like the Amazon Mastercard or RBC Rewards+ Visa allow users to convert their points into gift cards or merchandise. This provides flexibility, as you can use your points for a range of products and services.
For most credit card users, the amount of rewards earned is directly proportional to the amount spent. Your surcharge payments become a part of this equation as well.
When Paying Surcharges Makes the Most Sense
While credit card surcharges are an added cost, there are many scenarios where paying the surcharge can be a smart financial decision, especially if you’re maximizing the rewards your credit card offers.
- Large Purchases and Big-Ticket Items: If you’re making a significant purchase, such as electronics, appliances, or booking travel, the rewards you earn can outweigh the surcharge. For example, a $2,000 purchase with a 2.4% surcharge will cost you an additional $48. However, if you’re earning 3% cashback on travel purchases, you’ll get $60 back – covering the surcharge and leaving you with extra rewards. This scenario is a great way to leverage your card to gain extra value, especially when larger purchases help you hit sign-up bonus thresholds faster.
- Service and Repair Businesses: For businesses in service industries, such as repairs or maintenance, where small but regular transactions occur, paying the surcharge can make sense. Many rewards programs offer cashback or points for everyday purchases, and these can add up quickly when you’re making frequent payments for services. The surcharge, especially if it’s relatively small, could be outweighed by the ongoing rewards you earn, making it a worthwhile trade-off for businesses that rely on credit card payments for their services.
- Everyday and Recurring Expenses: Regular expenses like groceries, gas, or utility bills, credit card rewards programs can still make surcharges worthwhile. If you have a rewards card that gives you 1-2% cashback on such purchases, even with a surcharge, you’re still getting some value. For recurring monthly payments, such as subscriptions or utility bills, surcharges can be justified if they’re balanced out by the rewards accumulated over time.
- Frequent Travelers and Big-Point Purchases: Travel-focused credit cards, like those offering Aeroplan or Avion points, make paying a surcharge more appealing, especially when booking flights, hotels, or vacation packages. While the surcharge may seem like an added cost, the points or miles you earn can be worth far more, potentially covering part or all of the surcharge cost. If you’re someone who travels frequently, the rewards from these purchases can unlock significant travel discounts, hotel stays, or flight upgrades, making the surcharge well worth it.
Chargeback Protection: The Hidden Benefit
A key advantage of using credit cards that many consumers overlook is chargeback protection. When you use a credit card for purchases, especially larger transactions, you are often eligible to dispute the charge if there’s a problem with the product or service. This added security is particularly valuable when purchasing big-ticket items or booking services that are difficult to refund.
For example, if a contractor does subpar work or a hotel booking is not as advertised, credit cards offer the ability to dispute the charge and potentially recover your money. This is something you won’t get with debit or cash payments.
While some businesses may charge a surcharge to offset the risk of chargebacks, it’s worth considering the added peace of mind that comes with using credit cards for these types of transactions. In some cases, the protection offered by a credit card may make the surcharge a worthwhile cost.
The Impact of Surcharges on Small Business Cash Flow
For small businesses, managing cash flow is a top priority, and that can be directly impacted by credit card surcharges. While some businesses pass the surcharge directly to consumers, others may absorb the costs themselves to stay competitive. However, the flexibility to offer consumers the option of paying a surcharge can be beneficial, allowing customers to choose the payment method that works best for them.
For instance, service-oriented businesses like repair shops or retailers can provide an upfront choice to their customers: use a credit card with a surcharge or choose another payment method without one. This choice can help mitigate potential lost revenue from absorbing the surcharge, ensuring that small businesses maintain healthy cash flow while still accommodating customer preferences.
Do you think it’s worth it?
In the end, paying a credit card surcharge to earn rewards in Canada depends on your personal spending habits and goals. For large purchases, travel points, or significant rewards, paying the surcharge can be a smart move. However, for smaller purchases or low-return credit cards, you may be better off avoiding the surcharge altogether by opting for alternative payment methods.
Ultimately, the key to making the most of your credit card rewards is understanding when the surcharge is worth the benefit and when it’s not. Take a closer look at your spending patterns, the types of rewards you earn, and whether the protection offered by credit card chargebacks is something you value. With this knowledge, you can make more informed decisions and ensure that you’re getting the most value from your credit card rewards program.
