The Canadian government announced today that it has ended agreements with Visa and Mastercard to reduce credit card transaction fees for small businesses.

These agreements also protect reward points offered to Canadian consumers by major Canadian banks.

The Canadian government stated that small businesses pay fees to process credit card transactions, with the largest component being interchange fees paid to the financial institutions that issue credit cards, such as banks.

It explained that these new agreements will help more than 90% of businesses that accept credit cards in Canada qualify for lower rates and reduce their interchange fees by up to 27% from the current weighted average price.

These reductions are expected to save qualified small Canadian businesses about one billion dollars over five years. For qualified small businesses, Visa and Mastercard agreed in the final agreements on the following:

Reducing local consumer credit interchange fees for in-store transactions to an average weighted annual interchange rate of 0.95%.

Reducing local consumer credit interchange fees for online transactions by 10 basis points, leading to reductions of up to 7%.

Providing free access to online fraud prevention and cybersecurity resources to help small businesses grow their online sales while preventing fraud and chargebacks.

It is worth mentioning that small businesses with annual Visa sales volume below USD 300,000 will qualify for lower interchange fees from Visa, and those with annual Mastercard sales volume below USD 175,000 will qualify for lower fees from Mastercard.

Small businesses will also need to qualify for each credit card network separately.

Non-profit organizations with transaction volumes below these thresholds will also benefit from the reduced rates.

As part of these new agreements with Visa and Mastercard, major Canadian banks agreed to protect Canadians’ reward points.

The new rates will take effect in the fall of 2024.