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3 Easy Ways to Avoid a Credit Card Surcharge in Canada

I enjoy writing about experiences from my own life so that my tips may help others.

Consumers rely on credit cards to make everyday purchases

Consumers rely on credit cards to make everyday purchases

If you're like most Canadians, you probably only think about credit card surcharges when they appear in an email or on your bill. It's not a topic that gets much attention outside the world of finance and business, but it's one that can cost consumers a lot of money. In this article, we'll explain Canada's new rules around merchant credit card fees and the top 3 easy ways to avoid them.

What is the Canadian Credit Card Surcharge?

Starting October 2022, new regulations regarding credit card transaction fees have been introduced that entitle credit card companies like Visa and Mastercard to charge a surcharge fee on consumer purchases. With the cost of living already so high, this news could come as an unpleasant surprise to many Canadian consumers who rely on using credit cards for making the majority of their purchases.

Fortunately, will get some warning about the implementation of this, which will help us to decide whether we want to use a different method of payment instead, and thus avoid being subjected to the fee.

According to CBC, merchants must give credit card providers 30 days' notice of their intent to begin charging a surcharge fee. They must also make it very transparent to consumers at the time of making payment that there's going to be a surcharge applied to their card. One of the rules is that it can't be more than they the credit card companies pay themselves.

Finally, the surcharge will be capped at 2.4% of the bill, plus additional tax will be added as appropriate.

But these rules will not be enforced in Quebec, because that type of fee is disallowed under Quebec's Consumer Protection Act.

How Much Can Merchants Charge to Consumers?

The maximum surcharge in Canada is 2.4%, which means that if you pay with a credit card, you could be charged up to 2.4% more than those who pay in cash.

Some merchants can elect to charge an amount lower than that, or even no fee at all. For example, Canadian grocery stores are still deliberating whether to implement the charge at all, perhaps in fear of overwhelming consumers that are already struggling with the high cost of food. Telus Corporation, on the other hand, immediately jumped on the bandwagon and now charge a credit card surcharge fee of 1.5% to their customers.

As a Canadian consumer, you might wonder how all this will affect you. Well, as an example, if your grocery bill comes to $100, there's a chance that you face an additional $2.40 being charged to your bill on top of that if the merchant has elected to charge the maximum 2.4% surcharge fee.

Thinking on a larger scale, what happens if you are faced with a bill for a larger ticketed item, such as vehicle repairs, or a vacation? A $10,000 bill could be subjected up to a maximum of $240 in credit card surcharge fees!

So, how do we avoid paying that surcharge fee, and put our money back into our own pockets?

Can Canadian Surcharge Fees Be Avoided?

The great news is that Canadian surcharge fees absolutely can be avoided! Aside from cash, the surcharge doesn't apply to debit cards or prepaid credit cards. So, here are three easy ways I would suggest that you could go about avoiding surcharge fees:

1. Use Cash

First, if possible, try to use cash instead of credit cards when making purchases. This will ensure that no extra fees will be charged on top of your bill. Keep a little cash on your person for those small purchases and you won't have to worry about paying any surcharge fees.

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Cash can be particularly useful when buying smaller items, or when visiting your local store. Using cash is not always so practical though when, for example you are making online purchases.

2. Use a Debit Card

Debit cards can be a great option for avoiding surcharge fees when making purchases at the store, but again it isn't an ideal solution for online shopping.

3. Use a Prepaid Credit Card

The absolute easiest way to avoid Canadian credit card surcharge fees, and have the freedom to make smaller purchases as well as large ones, and shop locally as well as online, is by using a prepaid credit card such as KOHO. These cards operate just like regular credit cards but have the added benefit of not charging any interest or other hidden account fees on top of your purchases.

At the time of writing, prepaid Visa and Mastercards are not subject to the Canadian Surcharge Fee.

At the time of writing, prepaid Visa and Mastercards are not subject to the Canadian Surcharge Fee.

My Review of KOHO

KOHO is a different kind of credit card; it is a free prepaid Mastercard that allows you to spend money like a credit card, and yet does not charge any fees or interest, and that includes no Canadian surcharge fees, and no annual fees! The KOHO Mastercard and can be used anywhere in the world where Mastercard is accepted.

When I signed up, I received a physical card just like a real Mastercard, which I was able to link directly with my own chequing account. This then gave me the freedom to load (and reload) the card with funds that were already my own money. You see, the difference with KOHO is that you preload the card with money rather than "borrow" the money on credit. Because it's your money, in your account, you can simply load as much or as little as you like and then spend it in the same manner as a regular Mastercard. For this reason, a credit check isn't even required!

Aside from not having to worry about any paying any fees, I found the freedom and power to spend more wisely as well as saving more money back into my own pocket, too. This is because KOHO acts like both a spending and a savings account. I started to realize that I could get cash back instantly, as well as earn some interest on my entire account. By getting cash back on every purchase, as well as earning interest, I am also helping myself to build up a credit score.

KOHO continues to be, for me, one of the best ways to spend, save, and take control of my finances. And without any hidden account fees, that really does make it one of the easiest ways to avoid credit card surcharge fees in Canada.

Downloading the KOHO app is the best way to get started: in addition to it being completely free to use, they are also offering a $20 cash bonus to readers of this article when you use the KOHO referral code WCEP9NRH during the sign up process.

  • What Exactly is KOHO?
    KOHO is a free spending and savings account where you can get instant cash back and earn interest on your entire account. You get a prepaid reloadable Mastercard that gives you all the spending power of a credit card without any fees or interest.

Conclusion

Merchants have the right to charge a surcharge on credit card transactions, but they must follow certain rules before doing so. The best way to avoid these fees is by not using your credit card at all when making purchases in Canada.

Three of the easiest ways to avoid credit card surcharge fees in Canada is to use cash, a debit card, or sign up for a prepaid Canadian credit card such as KOHO.

Sources and Further Reading

  • Merchant Surcharge Rules & Fees | Mastercard
    Learn more about the extra checkout fee, also known as a surcharge, to customers who pay with Mastercard-branded credit cards. These fees are not allowed on Debit Mastercard or Mastercard prepaid cards.
  • VISA - Surcharge FAQs
    Visa Canada is modifying rules and business processes to allow Canadian merchants to apply a fee, or “surcharge,” to customers who pay with a Visa credit card. Merchant surcharges are not permitted on Visa debit or prepaid card transactions.
  • Paying With a Credit Card?
    Cost-conscious shoppers should prepare themselves to start seeing a new fee when they make purchases, as retailers and other businesses will now be allowed to charge customers who pay with a credit card a fee for transactions.

Disclosure: I only recommend products that I would use myself and all opinions expressed here are my own. This article may contain affiliate links that at no additional cost to you, I may earn a small commission.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2022 Louise

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