Reviewed by Mayer Hyman, Payments Specialist | Reviewed for accuracy July 2026
Key Takeaways
- Canada’s revised interchange rules took effect October 19, 2024, cutting fees by up to 27% for qualifying small businesses — a change the federal government estimates will save eligible merchants roughly $1 billion over five years (Department of Finance Canada, 2024).
- More than 90% of small and medium-sized businesses that accept credit cards qualify for the lower rates (Department of Finance Canada, 2024).
- The Canadian Federation of Independent Business has flagged that some processors are shifting merchants onto blended flat-rate plans, which risks absorbing the savings the reform was designed to deliver (CFIB, 2024).
- Interchange-plus pricing still passes the reduced rates straight through to merchants; flat-rate pricing can quietly erase them.
For small businesses, accepting credit card payments is essential — but it comes at a cost. Behind every transaction lies a concealed web of fees charged by banks, card networks, and payment processors. Canada’s 2024 interchange reform was designed to reduce those costs, but many small business owners still aren’t seeing the benefit.
In fact, many are paying more than ever — and the reason comes down to pricing models.
Understanding Payment Processing Fees
Every credit card transaction includes several types of fees:
- Interchange fees – Paid to the cardholder’s bank
- Assessment fees – Paid to the card networks (Visa, Mastercard)
- Processor markups – Charged by payment providers
These fees are unavoidable — but how they’re packaged and passed on to your business is what you should pay attention to.
The Government’s Move to Help Small Businesses
In May 2023, the Government of Canada reached an agreement with Visa and Mastercard to reduce interchange fees for small businesses. These changes took effect on October 19, 2024.
Merchants with:
- Under $300,000 in annual Visa sales
- Under $175,000 in Mastercard sales
now qualify for average savings of up to 27% on interchange fees. According to the Department of Finance, more than 90% of small and medium-sized businesses that accept credit cards meet these thresholds, and the government estimates the reductions will save eligible merchants close to $1 billion over five years (Department of Finance Canada, 2024).
The revised Code of Conduct for the Credit and Debit Card Industry also aimed to improve pricing transparency and strengthen merchant protections.
Why Many Merchants Haven’t Seen Savings
Because payment processors ultimately control how fees are applied, and not all of them have passed the savings along. Despite these positive developments, many eligible businesses haven’t seen a drop in their processing costs. The Canadian Federation of Independent Business (CFIB, 2024) has said it is actively monitoring whether the full savings from this agreement are passed on to small business owners, rather than being absorbed by processors offering blended rates.
Cartis Payments automatically updated its pricing to reflect the new, lower interchange rates when they took effect, and even merchants not on a pass-through model saw modest reductions.
Unfortunately, some large processors are taking a different approach.
The Rise of Flat-Rate Pricing: A Step Backward
In response to interchange reductions, many large processors are migrating small and mid-sized merchants to flat-rate pricing. This pricing model, popularized by companies like Square, Stripe, and PayPal, offers a single blended rate for all transactions.
It’s marketed as being “simple” or “transparent,” but for most small businesses, it results in higher costs and less visibility.
Flat-Rate vs Interchange-Plus: Key Differences
| Feature | Flat-Rate Pricing | Interchange‑Plus Pricing |
|---|---|---|
| Fee Structure | Fixed rate regardless of card type | Variable rate based on actual card cost |
| Cost Efficiency | Typically higher | Lower, especially for basic cards |
| Transparency | Minimal fee breakdown | Full visibility into each fee |
| Scalability | Penalizes growth | Rewards volume with better rates |
Flat-rate pricing averages the cost across all transactions — meaning merchants pay the same high rate whether a customer uses a premium rewards card or a basic debit card. In contrast, interchange‑plus pricing allows merchants to benefit from lower‑cost cards and provides a detailed breakdown of every charge.
Small Businesses Deserve Better
Ironically, the very businesses meant to benefit from the government’s fee reduction are now being shifted to pricing models that obscure costs and eliminate savings.
While interchange‑plus pricing is still available, it’s increasingly being offered only to larger merchants. Small businesses are left with flat‑rate plans that trade real savings for perceived simplicity.
How to Check Whether You’re Actually Seeing the Savings
Here’s how a merchant can tell whether the 2024 interchange reduction actually reached their account:
- Compare pricing models: ask your processor directly whether you’re on interchange‑plus or a blended flat rate.
- Request a line-item breakdown: a genuine interchange‑plus statement shows interchange, assessment fees, and markup as separate line items.
- Watch for automatic pass-through: a processor that reflects rate changes without you having to ask is a strong signal you’re on a transparent pricing model.
Simple Isn’t Always Better
Flat‑rate pricing often hides rising costs behind a single number. True transparency means knowing where every dollar goes — and having the power to optimize your costs.
If your credit card processing rates haven’t gone down since the October 2024 reform — or worse, have gone up — it’s time to ask questions and make changes. Contact us today for a free review of your merchant statement.
FAQ
Did Canada’s 2024 interchange fee reform actually lower costs for small businesses?
Yes, for merchants that qualify and are billed on an interchange-plus basis. The Department of Finance estimates the reductions save eligible small businesses close to $1 billion over five years, and more than 90% of small and medium-sized businesses that accept credit cards meet the eligibility thresholds. But the savings only reach a merchant’s bottom line if their processor passes the lower interchange rate through directly.
What’s the difference between flat-rate and interchange-plus pricing?
Interchange-plus pricing charges the actual interchange fee for each transaction plus a fixed processor markup, so savings from rate reductions flow straight to the merchant. Flat-rate pricing charges one blended rate regardless of card type, which can absorb those savings inside the processor’s margin instead.
How do I know if my processor passed on the interchange savings?
Ask for a statement that itemizes interchange, assessment fees, and markup separately. If your statement only shows a single blended rate, you’re likely on a flat-rate plan and may not be receiving the full benefit of the 2024 rate reduction.
