In 2013 when we acquired this business, paying by credit card was not an option. Our customers left cheques and cash for our drivers and we made deposits at the bank. It was inefficient and led to us spending a lot of time following up on payment from customers.
We made the conscious decision to add the ability to use credit cards to our business. It made good business sense and it allowed for ease of payment. We still collected cash and cheques, and started to accept e-transfers.
The pandemic completely changed that. We no longer collected cash and cheques. We transitioned to electronic payments entirely. Currently over 75% of all payments we collect are via credit card.
For our business this makes sense. It allows you the customer to easily track your expenses and allows us to quickly and easily receive payment.
Last week the laws in Canada changed around credit cards. The change in the law was prompted by the high fees associated with many credit cards in Canada. My sister-in -law shared on the weekend how many airline points she has because they use their credit card for everything. As a consumer, I admit I have benefitted from this too! And as the owner of a small business, the news of the change in this law created a moment of pause for us to look at how much credit card fees cost our business on an annual basis.
Here are some points of comparison based on our last financial year:
- credit card fees represent over 5% of our expenses
- our warehouse rent represents 3% of our expenses
- health benefits for staff represent 2% of our expenses
We know consumers are under a ton of financial pressure right now. We know credit card fees are a cost of doing business. And as a small business who is also facing the pressure of inflation, we don’t want to face a situation where we compromise the well-being of our staff to pay credit card fees. We know that our customer base, who is also deeply caring, would also not want to see this happen.
So what’s the solution? The change in the law is a good time to reflect as a consumer on the impact of your choice when you make a payment. Are you using that points-collecting card with small businesses? Those cards can cost a small business 3% per transaction. Do you have a simpler card that would have less fees that you could use instead? Is it easy for you to make payments by e-transfer. We are happy to receive payment in this way.
Research by the Bank of Canada found that consumers pay far more than they get in credit card rewards points because these fees become embedded in retail prices, with low-income consumers paying a disproportionately high net cost. During a period of high inflation and high interest rates, we can all take steps by choosing to pay by debit, or by e-transfer, to mitigate these costs and create a little more equity in our financial systems.