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Merchant Reward Card – Catch 22

In special section on Travel & Credit Card Rewards in the Thursday, September 24th issue of the Globe & Mail it was reported that redemptions of points for credit cards that deliver reward points is up. It was also reported that smart loyalty programs are responding to that demand. What was absent from the special section was the impact loyalty reward cards are having on merchants accepting the cards.

A report made to the Government Policy Committee of the Greater Oshawa Chamber of Commerce on Credit Card Charges clarified the fee structure for Loyalty Reward Cards.
The committee learned that the credit card companies include in the fine print of the merchant agreements that higher fees will apply on non-swiped and certain transactions. This covers off the Loyalty Reward cards and this may not be generally understood by the Merchants.

Loyalty Reward Cards do carry a surcharge on different Reward Cards, for example the cards that provide for air travel points etc. may have an additional surcharge fee the merchant pays. The committee also learned the Chambers Affinity partner First Data/TD Merchant Services has the lowest surcharge for these types of transactions. Other processors Reward Card surcharge fees are higher on Reward Card and can range from .50% up to a 1.50% on the transaction. The Chamber Plan currently is the most competitive and has the lowest surcharge fee of only .30%, meaning the 1.68% on VISA electronic deposits becomes 1.98% for reward cards credit cards. For example on a $100.00 transaction the merchant would be billed $1.98 for the transaction.

The report noted the Chamber of Commerce plan has a  – no keyed VISA fee – which means for example a merchant using the Chamber plan will key in a customers VISA card number to accept a payment and will not pay an additional fee. For many other processors there may be a fee. The report also noted if the same $100.00 transaction was completed with Interact, under the Chamber plan the payment transaction fee on electronic deposit would be 9 cents and that the .09 cent fee is applicable no matter what the amount of the transaction.  

The report acknowledged that in this day in age consumers and merchants who possess and use Reward Cards want the opportunity of these plans and being able to accumulate reward points to redeem for trips and merchandise. The Catch 22 – the merchant who accepts the cards will pay at the end of the month a surcharge for Reward Card transactions.

If you would like more information on the Greater Oshawa Chamber of Commerce VISA/MasterCard Merchant plan call the Chamber at 905-728-1683.