Every time you make a purchase using a credit card, you support a U.S. financial giant.
While most credit cards in Canada are issued by domestic banks, credit unions and other financial companies, they are also linked to Visa International, based in San Francisco; Mastercard, based in Purchase, N.Y.; or New York-based American Express.
A Canadian alternative is available – Interac debit and e-transfers.
“Interac is 100-per-cent Canadian,” said Debbie Gamble, Interac’s group head of strategy and marketing. “It was created by Canadians. It’s run by Canadians. We focus only on Canadians, and we’ve been doing that since, well, we celebrated our 40th anniversary last November.”
Interac and cash are the patriotic choices for payments in a trade war with the United States. They’re also exactly in tune with the current economic situation for both consumers and business. Cash and debit give you more control over your money, and also cost retailers less than when they accept payments by credit card.
Credit cards are the consumer’s top choice when paying for things. The most recent numbers, for 2023, show credit cards accounted for 33 per cent of transaction volume, debit accounted for 30 per cent and cash was at 11 per cent. Credit-card volumes grew by 9 per cent compared with the previous year, debit by 6 per cent and cash fell 20 per cent.
Credit cards built their following by offering travel rewards or cash back, plus smaller inducements such as insurance coverage for rental cars. As long as you’re able to pay on time, credit cards are a good way to squeeze some bonus value out of your spending. In normal times, anyway.
Today, Canadians are looking at all aspects of their lives to see if there are ways to support the domestic economy and resist U.S. hostility in the form of tariffs and presidential musings about annexation.
Paying by debit can’t compete with credit cards for producing rewards with tangible value. In a tough economy, cashback credit-card rewards can be awfully useful for offsetting the cost of purchases like a week’s groceries.
What debit offers is a way of keeping your money inside Canada. Interac is owned by close to 300 Canadian banks and credit unions, Ms. Gamble said. Big banks have proportionately more shares, but the structure of the Interac board limits their control of the organization.
The Canadian-ness of Interac extends to its systems and data processing. Ms. Gamble said Interac’s payment networks must meet requirements for data sovereignty, which means all processing is done in Canada.
Credit cards have a Canadian veneer in the form of the issuing bank, credit union and others. But these cards make money for Visa, Mastercard and Amex as well as our domestic financial institutions.
When you pay for a purchase with a credit card, the seller pays a small but not insignificant percentage through what are known as interchange fees. These fees are shared by credit-card networks such as Visa and issuers such as banks, said Lynda Lovett of the consulting firm MarketSense Inc.
“Issuers also benefit from the interest charges on credit card balances, cash advances and late fees,” Ms. Lovett said in an e-mail.
Debit differs in that retailers pay a flat fee that works out to be a fraction of credit-card interchange fees. The Retail Council of Canada says debit transactions generally cost less than 10 cents to process, but the fee can be as high as 40 cents.
The federal government announced a decline of up to 27 per cent in credit-card fees for small businesses last fall. Even so, interchange fees for in-store transactions amount to an annual weighted average rate of 0.95 per cent of purchases. That’s 95 cents on a $100 purchase.
Ms. Gamble made a case that debit is suited for these times in two ways, the first being that you have more control over your money. Debit payments come out of your bank account in real time, more or less, while credit-card purchases are billed monthly.
With its lower interchange fee, debit also offers a way to support local business at a time when the trade war weighs on the economy. Credit cards help you make U.S. Big Finance wealthier.
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