May 6, 2009
-
News: Canadian Grocers Uproar Over CC Campaign
Canadian grocers are in an uproar over a new advertising campaign encouraging consumers to use their credit cards to purchase groceries. The Scotiabank has been advertising its new Visa card and offering 2% cash back on grocery and gas purchases. Retailers fear the new Visa card is the latest attempt at promoting the so called “premium” card. The “premium” card is the financial industry’s latest wave of credit cards which imposes higher fees than the standard card. Retailers have been complaining about the new “premium” cards which carry higher processing fees. They fear accepting the added burden of paying these higher fees could force them to close their doors. In response, both Visa and MasterCard have reduced the processing fees for groceries and gas in hopes of motivating retailers to accept the credit cards. The newest campaign brings added concerns to grocers who fear the release of still another “premium” card. However, according to Scotiabank the new Visa card is not a “premium” card.
This latest wave of ads has sent many grocers banging on the door of the Canadian Federation of Independent Grocers, John Scott, President of the Federation, says he has seen the ads and finds them very scary. Scott, who appeared before a Senate Banking Committee hearing, says his office has received numerous calls from angry retailers from all across the country. With the onset of massive complaints of increasing credit card interest rates and fees, the Senate Committee is searching for a solution. Finance Minister Jim Flaherty had previously promised to curb the escalating unfair practices of lenders, however, limited his proposals to capping interest rates only. Some members believe this is not good enough and say it’s time for Canada to follow the lead of other countries by putting regulations in place to restrict unfair practices of the credit card industry. Scott says such controls are “essential” in promoting a healthy economy.
Nevertheless, debit cards continue to be less expensive to process. Debit cards carry a flat fee of seven cents per transaction, whereas credit cards usually cost the retailer 2% of the purchase. Since consumers typically use their debit cards for as much as 70% of their grocery purchases, a switch would be a very costly venture for these merchants.