What’s it all about?

Interac, Canada’s efficient and cost-effective debit system, has now applied to the Competition Bureau to re-structure and join the Big Credit Card companies in charging higher fees.

The Interac debit card, issued by Canadian financial institutions, is by far the dominant debit card used in Canada. In 2006, there were 3.3 billion Interac transactions totaling $149 billion. About 40% of consumers’ payments are made using debit cards.

How does it work?

Currently, processors charge a flat merchant fee varying between 0 and 15 cents per transaction. However, in light of increased competition from Visa and MasterCard, Interac has applied to the Competition Bureau to re-structure to allow it to change its fee structure to attract new issuers - namely, the Canadian banks.

What’s the outcome?

The anticipated outcome of the proposed re-structuring will most likely be a higher flat merchant charge, or the introduction of an interchange fee, which is a percentage of the price of a particular good.

Although it is not yet clear what the re-structuring will look like, the end result is a higher fee charged to retailers and other businesses for accepting debit cards. This rise in fees will add to the hundreds of dollars a year the Canadians already pay in hidden credit card fees.