Take credit out of Fridays

Ever had to freeze your credit card in block of ice to resist temptation?

The idea is that in the time it takes to thaw or hack away the ice your desire to make an impulse purchase will have cooled. I have never used this strategy, but I can see how it works. Even if you aren’t up to your neck in credit card debt, thinking twice before making a purchase is never a bad idea.

Now the Canadian Federation of Independent Business has adopted the frozen credit card as a symbol for a campaign it hopes will also benefit merchants. “Small businesses are finding it increasingly challenging to absorb the high fees they are charged by the credit card companies and banks,” CFIB president Dan Kelly said for the kickoff of the campaign earlier this week. “Very few consumers know that $5-7 billion each year in credit card processing fees is embedded in the cost of everything they buy, and with ever higher tiers of premium cards hitting the market, that cost is only going up.”

So the CFIB is encouraging consumers to keep the plastic in their wallets one day a week, dubbing it Credit Free Friday.

The federation, which represents 109,000 small and medium-sized businesses across the country, wants to raise awareness that two to 3.5 per cent of every credit card sale has to be forwarded by the merchant to the credit card companies and banks that issue them.

Merchant agreements with the credit card companies prohibit them from adding those costs to the bills of customers who pay with plastic. That means the cost gets absorbed by customers, even if they pay with cash or an Interac debit card — which costs merchants five to 10 cents per transaction.

Earlier this year, Canada’s Competition Tribunal dismissed a complaint against Visa and MasterCard alleging these rules eliminate competition. The ball is now in the federal government’s court to respond to calls by retailers and the New Democratic Party to cap the fees or allow merchants to charge customers who use credit cards.

Neither customers nor small businesses will benefit, according to a paper released last month by an Ottawa-based think tank. Instead, the government should remove restrictions on Interac so that Canada’s nonprofit debit card system can be competitive with credit card companies, argues the report for the MacDonald-Laurier Institute by four academics.

There’s no evidence regulation of fees in the United States and Australia has resulted in lower retail prices to consumers, it says. Interestingly, bigbox retailers have been the biggest beneficiaries of government regulation while small merchants actually saw their costs go up, say the authors. So what’s a consumer to do? I am all for showing some discipline when it comes to credit cards and I like to support local merchants. I pay cash or by debit card to reduce their costs. Folks with credit cards that give reward points — the ones that cost merchants the most — might feel differently.

Credit Free Fridays aren’t likely to do much for business bottom lines, but they could be good therapy for consumers who want to improve theirs.