Credit card processing in Ontario

Credit card surcharging in Ontario and Toronto

The Financial Consumer Agency of Canada (FCAC) says merchants may add a surcharge to credit card transactions everywhere in Canada except Quebec. The maximum surcharge is 2.4%, and it cannot be higher than your actual cost to accept the credit card. FCAC says you must give your payment processor advance written notice of your intention to surcharge, clearly disclose the surcharge before the transaction is completed, and post notice at the point of sale, in store and online, and at the entrance of physical stores. Visa Canada's surcharging FAQ adds that the notice to your acquirer must be at least 30 days, that the surcharge must appear on the receipt, and that Visa debit and prepaid cards cannot be surcharged. Visa also says provincial or federal law takes precedence over its rules. We did not find an Ontario government source that sets a separate provincial rule on credit card surcharges, so we are not stating one; check current rules before you start. Ontario passed a new Consumer Protection Act, 2023 (Bill 142, S.O. 2023, c. 23), with parts coming into force on dates named by proclamation, so watch for changes. If you sell online to customers in Quebec, the Quebec prohibition is a separate question to take to counsel.

HST on card sales and on a surcharge

The Canada Revenue Agency lists Ontario's HST rate at 13%. HST applies to the taxable price of what you sell, and the total including tax is what goes through the terminal; paying by card does not change the tax owed on the sale. CRA guidance GI-200 says a credit card surcharge is not subject to GST/HST when it is shown and charged separately from the price of the goods or services and from all other fees, is charged solely for accepting the credit card, is imposed by the merchant making the sale, and is subject to payment card network rules. If a card fee is folded into your prices or does not meet those conditions, the treatment may differ, so confirm with your accountant.

Interac debit

Interac says merchants pay a processing fee to the acquirers that connect them to the Interac network, and that the fee is set in the merchant's agreement with its provider. On surcharges, Interac states that merchants may not directly apply a surcharge to a cardholder for using Interac Debit. Where a surcharge is imposed, Interac says it must be applied by the merchant's acquirer, capped at $0.25, printed on the transaction record and disclosed, with the customer able to cancel at no cost. Ask your processor how your Interac transactions are priced and never add your own fee to a debit payment.

Lower credit card fees for small businesses

The Department of Finance Canada says lower Visa and Mastercard interchange for small businesses took effect on October 19, 2024. Eligible businesses have annual Visa sales volume below $300,000 or annual Mastercard sales volume below $175,000. For in-store domestic consumer credit transactions, the government says interchange falls to an annual weighted average of 0.95%, and online domestic consumer credit interchange drops by 10 basis points. Interchange is only part of what you pay, so check your statement to see whether the reduction reaches you.

Your rights under the payment card Code of Conduct

Card acceptance in Ontario is covered by the federal Code of Conduct for the Payment Card Industry in Canada, supervised by FCAC. According to FCAC, your provider must give you 30 to 60 calendar days' notice before a fee increase or new fee, and you can exit without penalty within 70 calendar days of the fee change. Monthly statements must show your effective merchant discount rate and the rates and amounts for interchange and network fees. Your provider must tell you if it will not pass on applicable domestic network fee reductions in full, and must run a clear, accessible complaint process. The Department of Finance says the revised Code, effective October 30, 2024, shortens the complaint response time to 20 business days.