New research by the Canadian Federation of Independent Business (CFIB) shows that credit card transaction costs for a number of Saskatchewan cities are on the rise. Some municipalities pay transaction fees for payments made by residents and businesses for municipal services, permits, licenses, etc.
According to data gathered through Freedom of Information requests, from 2013-2015, the City of Swift Current paid $187,736 cumulatively to process credit card transactions. However, as of fall 2016, the City Swift Current no longer accepts pre-approved credit card payments. In addition, from 2013-2015, the City of Saskatoon paid $732,083 cumulatively to process credit card transactions while the City of Regina paid the most in credit card processing fees, $816,187, during the same time period. To control the cost of accepting credit cards, the City of Regina tenders for a new bank every four years.
Alternative approaches to controlling credit card processing costs:
Both the City of Prince Albert, and the City of Moose Jaw have taken alternative approaches to reduce the cost of processing credit card transactions.
The City of Prince Albert does not accept credit cards for any payments (including property tax, utilities, and fees) apart from at recreational facilities, while the City of Moose Jaw only permits the use of credit cards through a ‘user pay’ third party processor.
There are obvious benefits to accepting credit card payments. However, the significant expense highlights the need for efforts to minimize costs.
Small businesses are well aware of the costs of accepting credit cards. Most scrutinize various credit card processing options to find the lowest fees.
In fact, those rising costs led CFIB to negotiate and offer discounted rates to its 95,000 small business members across Canada. Most recently, the CFIB reached an agreement directly with Mastercard, which allows CFIB members to get the same rate as individual merchants with over $3 billion in Mastercard sales. This is an industry first and goes into effect starting April 3rd, 2017.
A similar opportunity exists for municipal governments to work together to also reduce the rising cost of credit card processing fees.
Recommendations:
To ensure municipalities are minimizing the costs of credit card transaction fees, CFIB has the following recommendations:
- Educate taxpayers about the impact of credit card fees on municipal operating costs and encourage debit payments at point of sale;
- Conduct regular reviews about which credit card payment processing companies offer the best rates;
- Track and regularly report data on the number of transactions, transaction fees, rates and type of credit card used (i.e. premium versus regular); and
- For municipalities which do not currently do so, tender the service provision out to credit card processing companies to obtain the lowest offered rates.
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