What the New Canadian Credit Card Surcharge Rules Mean for Your Business

Everything you need to know about the new Canadian credit card surcharge ruling—and how it may impact you and your customers.

credit card surcharge

Credit card processing fees (also known as “interchange fees” or “swipe fees”) can be a huge cost for business owners, with fees ranging anywhere from less than 1% to well over 3%. In general, the more basic the credit card, the lower the processing fee. In contrast, cards with perks like cash back or travel points tend to have higher credit card fees (and, in turn, higher processing fees).

In 2022, some of the world’s largest companies in the credit card industry (including Visa and Mastercard) settled a multi-million class-action lawsuit, agreeing to rebate a whopping $188 million to Canadian merchants to cover the costs of processing fees these credit card companies have collected over the past decade. Payments range between $30 and $600 per year (for smaller businesses) or $250 and $5,000 per year (for larger merchants).

While potentially being able to get a rebate for past fees was big news for business owners, another part of the settlement could have even more significant implications. Canadian businesses can now pass along the cost of accepting credit card transactions directly to their customers in the form of a surcharge.

But how, exactly, will this surcharge work? What does it mean for your business and your customers? And what kind of tax implications will this have for your taxes?

What Is the New Credit Card Surcharge?

As previously mentioned, the new credit card surcharge ruling is a direct result of the class-action lawsuit settlement that happened earlier this year. Under the recent ruling, Canadian merchants have the option to add a surcharge to a customer’s credit card transaction to cover some or all of the cost they pay to the credit card company in interchange fees.

There are, however, some stipulations. These include:

  • The surcharge maxes out at 2.4%. Merchants can only pass on up to 2.4% in credit card processing fees to their customers. So if, for example, your interchange fees are 3.5%, you would only be able to pass along a 2.4% surcharge to your customers—and the remaining 1.1% would be your full responsibility.
  • The surcharge can’t exceed the fee merchants pay to credit card companies. While the maximum surcharge a merchant can charge a customer is 2.4%, the surcharge can’t exceed the fee merchants pay to the credit card company to process payments. (If the merchant pays the credit card company a 1.5% processing fee, for example, they can’t charge customers more than 1.5% as a surcharge.)
  • Merchants must provide notice of their intent to charge a surcharge. Before they can start charging customers a surcharge, merchants must give card providers a 30-day notice.
  • Merchants must alert customers of the surcharge. Merchants must also make it clear to customers at the time of purchase that a surcharge will be added to their transaction amount.
  • The surcharge must be itemized. The credit card surcharge must be clearly itemized on the customer’s receipt and/or invoice as a separate line item.
  • Merchants in Quebec are not eligible. The new credit card surcharge ruling applies to merchants across Canada, except in Quebec. (These types of fees aren’t allowed under the province’s Consumer Protection Act.)

What Does This Mean for Your Business and Your Customers?



It’s important to note that just because you can pass on these processing fees to your customers through this surcharge doesn’t mean you have to. In fact, according to data outlined in a recent CBC article, only 1 in 5 small businesses plan to pass on this charge to their customers—with the other 80% opting to continue paying interchange fees on their own. So, if you’re wary of passing on this new fee to your customers, you’re not alone—and you’re not obligated to do so.

But if you decide to move forward with the surcharge, be prepared to have an open and honest conversation with your customers. As mentioned, the ruling stipulates that merchants must notify customers at the time of purchase of the surcharge (along with adding it as a line item on the customer’s receipt and/or invoice)—so be ready to answer any questions they may have about the additional surcharge and why they’re incurring the extra cost.

Now, if you’re struggling to keep up with the costs of running your business, including the cost of credit card processing fees, that’s a larger conversation—and you might need to take a broader look at your pricing strategy. In light of inflation and rising costs, increasing your prices might be an option worth considering.

Just keep in mind that if you decide to go this route, it’s essential not to mark up your prices solely to cover your credit card processing fees. As mentioned, the ruling clearly outlines that this surcharge must be clearly itemized on all receipts and invoices—and trying to get around that stipulation by marginally increasing your prices could get you in hot water.

How Will This Ruling Impact Taxes?

One of the biggest questions small business owners have on this new credit card processing fee ruling is how it will impact their taxes.

Currently, business owners can write off a portion of their credit card processing fees on their taxes. If you opt not to move forward with the surcharge, that process won’t change.

If you do decide to move forward with the surcharge, there will be some changes to how you report and pay your taxes, according to Melanie Schroeder, CPA and Owner of Out of the Box CPA.

Any fees you charge your customers—including this surcharge—are considered business income. And as such, they will increase your business’ revenue. Now, because you’re taking that surcharge and paying it to the credit card companies to cover your processing fees, you’ll still get to write off the allowed portion of your credit card processing fees come tax time—but because your total business revenue is higher, it may impact the amount you owe in income tax.

Regarding Goods and Services Tax (GST), there hasn’t been any definitive guidance on whether the surcharge is subject to GST.

As this ruling is new, tax implications aren’t clear and are still evolving. If you’re considering passing on this surcharge to your customers, it’s best to talk to your accountant or contact the Canada Revenue Agency (CRA) for further guidance.

What Does This Ruling Look Like in Action?

Built for owners

While the ability to pass credit card processing fees to customers through a surcharge is new, some companies are already publicly moving forward—including telecommunication giant Telus.

Telus recently announced that they would be charging a 1.5 % credit card processing fee, plus tax, to Consumer Mobility and Home Services customers that pay their bills with a credit card.

Choose What’s Right for Your Business

While this new ruling does offer the potential to lessen the financial burden on Canadian businesses accepting credit cards, it does so by passing on that burden to customers. And while many companies are fine with that model, others aren’t (or are still on the fence).

Ultimately, if you accept credit card payments, it’s up to you to decide what’s best for your business when it comes to who, exactly, is covering the credit card processing fees.

So, will you use this surcharge to pass along the service fees associated with accepting credit cards to your customers? Let us know in the comments!



Deanna deBara
about the author

Freelance Contributor Deanna deBara is an entrepreneur, speaker, and freelance writer who specializes in business and productivity topics. When she's not busy writing, she enjoys exploring the Pacific Northwest with her husband and dog. See more of her work and learn more about her services at deannadebara.com.