In October of last year, Canadian businesses were permitted to begin passing interchange fees onto consumers.
Needless to say, this watershed decision was a potential big loss for consumers, who can make use of the conveniences and protections afforded by credit cards. This was also a big deal for merchants, who could benefit from larger basket sizes when credit cards are a payment method.
One of the first businesses to begin charging customers this fee was Telus, who’d already announced their intention to charge the fees back in September 2022.
Fortunately, it looks like the telecom giant has had a change of heart. Let’s take a look.
Telus Backs Down on Credit Card Fees
On June 1, 2023, Telus customers who were enrolled in auto-pay via credit card may have noticed that their bills were a few dollars cheaper. As this is Canada, and telecommunications companies are known for charity about as much as their reliability, the question rankled: why was the cost of staying in touch decreasing?
Well, it looks like Telus has abandoned its highly unpopular policy of charging customers a 1.5% fee on the gross total of their phone bill for those who elect to pay with a credit card.
What’s interesting in this situation is that Telus chose not to broadcast or market that it was dropping the charges. Instead, it simply removed the fees earlier this month, and as of the June billing cycle, no customers will see them reappear.
Perhaps it didn’t want to draw attention to the change, as the decision to institute these fees in the first place led to backlash and controversy, both online and in real life.
Here in Western Canada, for example, Telus has a much larger footprint than elsewhere in the country. I personally know several individuals whose contracts were up for renewal, and chose to switch carriers and save the surcharge.
Are Credit Card Fees Much Ado About Nothing?
While we may never know why Telus chose to abandon the charge, I speculate it may have been that it was simply testing its viability, only to realize that the loss in revenue and customers wasn’t worth the marginal increase in credit card fees.
This is a phenomenon that I’ve always postulated as the “Catch-22” situation created by being fortunate to have a market as flush with credit cards as Canada’s.
Here in the Great White North, interchange fees are high, and so credit card companies have an incentive in making sure customers are using their products. This is achieved both by crafty marketing, and by rewarding customers with bonuses such as loyalty points and other perks.
While merchants do have to pay high fees, they benefit from increased basket sizes as customers choose to splurge or simply pay for something and think about it later. However, as is human nature we’re talking about here, merchants then often get frustrated at paying a fee – after all, it’s their product they’re selling, why should they have to pay a fee?
Sadly, nothing in this world is free, and often the interchange fee is simply the cost of doing business associated with benefiting from average larger baskets. Regardless, many merchants have lobbied for years to either slash interchange fees – which came with some serious legislative success – and also won the right to be permitted to pass on these costs to customers.
It appears that now a giant of the telecommunications industry has tested the practical effects of charging its consumers for using credit cards, and found the practice to be worthy of unceremonious and immediate abandonment.
As we haven’t yet seen many businesses seriously attempt to recoup swipe fees via similar schemes, it could mean the concern over increased prices may just be hyperbole.
Conclusion
Telus’s experiment with charging credit card fees on its cell phone bills has met an anticlimactic end. After less than a year of dinging customers with a 1.5% fee, the company has decided to move onto greener pastures.
This could either be due to the fees not being as profitable as it expected, or maybe it was too damaging to the company’s brand (and let’s face it, it’s pretty difficult to damage a telecom company’s reputation any harder in Canada).
Hopefully, this indicates that Canadian consumers will continue to enjoy their loyalty points, flexible payment options, and protections afforded by credit cards in the future by being permitted to use them as intended – to pay for things without being punished.
Until next time, swipe freely.
