Debit card service fees

While service fees (also sometimes referred to as convenience fees) can apply to both debit and credit card transactions, they are rarely charged in Canada. This is because card providers such as Visa, Mastercard and Amex typically don’t allow merchants to add an additional charge. Only a few eligible merchants can legally charge this fee on certain types of transactions in Canada.

What are service fees or “convenience fees”?

Whenever you buy goods or services using a debit, credit or prepaid card, the merchant will incur its own bank costs for processing that payment. Since service fees can’t be charged by most merchants in Canada, some merchants will cover processing costs by charging a higher price for their goods or services. Meanwhile, eligible merchants are allowed to cover the costs by imposing a service fee, or convenience fee, on card-based transactions. This may apply to either debit or credit card transactions.

Comprehensive guide to debit cards

When are service fees allowed to be charged?

Merchants or ATM operators can charge a service fee under these circumstances:

• The merchant or transaction is eligible. Each card provider has its own rules regarding which types of merchants or transactions can charge service fees. For example, Visa allows real estate agents, post-secondary institutions, childcare businesses and utilities companies (among several other types of businesses) to impose a fee for cardless transactions. This fee is capped at around 1.5%, depending on whether debit or credit is used. Rules vary between providers, so visit your card provider’s website for more information.
• Prior notification. You’re notified of the fee before you enter your PIN and confirm the charge.
• Option to cancel. They give you the opportunity to cancel your transaction at no cost if you choose to do so.

Remember that most merchants in Canada cannot legally charge a service fee unless they are considered “eligible” under the card provider’s rules.

How do I report a merchant that is improperly charging a service fee?

If you believe a merchant is charging a service fee in violation of a card provider’s rules, contact the card provider directly or reach out to your provincial or territorial consumer affairs office to file a report.

How do I avoid paying a service fee?

If you come across an eligible merchant who can legally charge a service fee, you can avoid paying the fee by:

• Using a different means of payment: merchants may avoid incurring a fee by accepting alternative forms of payment such as cash or cheque.
• Visiting a merchant or an ATM operator who doesn’t charge a service fee.

What about if I use payWave or Tap & Go®?

If you use the tap & go feature on your debit card, you may still face a service fee when paying for a product or service at an eligible merchant. They will need to inform you of the charge before you make your payment.

If an eligible merchant charges a service fee for the use of credit cards only, and you make a tap & go payment with your debit card, you may still face a service fee. This is due to the fact that tap & go transactions, or contactless payments such as Visa’s payWave or MasterCard’s Tap & Go®, are processed through the same system used for credit card transactions – so even if you tap & go using your debit card, you may be hit with a credit card service fee.

The pros and cons of tap and go

Debit card service fees FAQs

• Are merchants allowed to set a minimum purchase amount to use a debit or credit card?

  Yes, some merchants will have a minimum purchase amount that you must meet in order to use your debit or credit card. This ensures they themselves can cover the cost of the transaction since most merchants cannot charge a service fee. This minimum amount is usually around $5.

• Can merchants increase the price when you pay with a debit or credit card?

  No, unless they are an eligible merchant who is allowed to add a service charge for paying with plastic. That said, merchants are allowed to give discounts for different payment methods. For example, this is why you may see gas prices listed cheaper when you pay with cash rather than credit or debit.

• Can merchants charge less when you pay with a certain payment network?

  Yes, a merchant may decide to give you a discount if you pay with a Visa instead of a Mastercard or American Express, or vice versa. They cannot, however, increase the price when you pay with a certain network provider unless they are an eligible merchant who can legally add a service fee.

• Are service fees, convenience fees and surcharges the same thing?

  Service fees, also called convenience fees, can be charged by eligible merchants in Canada on specific types of transactions. They cover the costs of processing a debit or credit payment and are usually charged as a fixed cost (for example, $2.50 for all payment networks). Eligible merchants usually include businesses who typically wouldn't accept debit or credit, and ATM operators if you don't belong to their network.

  Surcharges are different than service fees. Merchants may charge them because you use a premium credit card that may cost the merchant a higher processing fee or because you use a specific payment network, such as American Express.

  Charging a surcharge is not currently legal, however this may change as Visa and Mastercard reexamine interchange rates every few years. The most recent changes came into effect in the summer of 2020, with rates staying close to what they were previously.

• Can I face a service fee or surcharge if I pay with my debit or credit card overseas?

  Yes, if surcharges and service fees are legal in the country you're travelling in, then you could face these fees. If you shop online with an overseas retailer, you could also face a service fee or a surcharge.

Written by

Emma Balmforth

Producer

Emma Balmforth is a producer at Finder. She is passionate about helping people make financial decisions that will benefit them now and in the future. She has written for a variety of publications including World Nomads, Trek Effect and Uncharted. Emma has a degree in Business and Psychology from the University of Waterloo. She enjoys backpacking, reading and taking long hikes and road trips with her adventurous dog. See full bio

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