Visa and Mastercard are American companies, and they essentially tax everybody by taking a percentage of purchase prices for themselves. Not exactly a small percentage either, 1.2% to 2.65%. Ever wonder why so many merchants say they don’t accept American Express? That’s because they charge quite a bit more to merchantes, 50% more than Visa or Mastercard. Anyway, we’re letting American companies tax us and we love them because we get rewards when we use cards. But it’s just a shell game because we pay more up front because businesses need to charge more to make up for payment processing charges. They get to sit in the middle and rake in the money.
Now the alternative in Canada is Interac. Interac charges a set amount per transcation. How much? 2 to 5.5 cents. Unless you’re going through Apple or Google Pay, and then it’s a percentage again.
Interac is also Canadian.
Want to stick it to Trump? Stop using credit cards (and Google Pay or Apple Pay) and switch to Interac. Want to make Canada better? Stop using credit cards and switch to Interac. Is it going to be inconvenient? Yes. Online shopping will be much harder but I have seen online Interac payments before and we can ask our favourite Canadian merchants to accept Interac online.
So in regards to payment cards etc… the CC’s basically have three primary benefits to them: 1. They can do ‘quick’ settlements for in person POS services. 2. They are generally accepted for online payments far more than other methods. 3. They provide access to credit / funds that the customer/user may not normally have access to, in exchange for a high interest rate on amounts owing each month. This also allows people to make larger purchases periodically, and pay off the purchase price over a slightly longer period.
For item 1, the physical cards are not that different than the regular debit cards that get used. There’s nothing ‘technically’ stopping a debit card from being mapped to a line of credit account on a banking system – such a card would be able to get used anywhere debit cards can get used, so pretty good market penetration off the bat. Only thing potentially stopping the tech side would be ‘paper’ agreements with interac etc… but those are ‘easy’ to change with enough demand. So you’d potentially need some adjustments from industry to accommodate this, across the payment switch providers and back end orgs.
For item 3, the availability of credit on those cards / accounts is entirely do-able through a small FI – historically, they offered lines of credit based on ‘signatures’ / ‘a promise to pay’ and good general payment standing at a credit bureau. Canada’s regulators changed much of that, forcing industry to heavily preference real estate backed loans – debt servicing risks for cc ‘personal’ locs are generally offloaded onto the credit card company directly. So the govt would likely need to relax their regulations on this front, otherwise its untenable for a small FI to provide credit based on signatures. In some ways this would likely be better for the end user, in terms of rates and limits, as a smaller FI, especially one that’s cooperative in nature, is less likely to push exploitative rates/conditions.
To clarify how that’s controlled by regulators: in BC as an example, the BC FSA regulates Credit Unions, and it also oversees the Credit Union Deposit Insurance Corporation – the thing that insures the CU’s deposits. Credit Unions pay premiums to CUDIC based on the “risk assessment” of the FSA. The FSA rates you very risky if you do signature loans / stuff not backed by RE or other ‘fully funded’ types of securities (eg. a $5k line of credit, ‘secured’ by a $5k term deposit). The annual cost difference can eat up like 30% of the small FI’s profit, if they’re deemed risky. Unless there was some way to ‘make up’ that loss via the ‘risky loans’, it’s not a viable business decision for CUs to take – especially when you add in the need for slightly increased monitoring for more ‘fluid’ payment accounts. Best to keep the regulators happy, to keep your insurance costs as low as possible. So you’d need govt to change its approach.
For item 2, there are lots of viable options for online payments already – the issue is mostly user adoption and business standardization / app availability. For purchases that aren’t ‘in person’, having a slightly longer settlement time isn’t a big issue – if you’re buying a thing online, in general, who cares if the payment is ‘instant’, or if it takes 15 mins to clear. Things like the interac e-transfers are able to route payments to people in this fashion, and are heavily used in some areas currently – paying trades, paying rent, paying kids extracurricular, and anything where ‘cheques’ use to be a norm. AFTs are also still used for many ‘bigger’ bills/companies, but they’re decreasing in popularity – there are fewer millenials/genZ who are using AFTs for payments, and fewer businesses that go through the process of getting it setup on their end to allow for it. That last parts a similar impediment to adoption of etransfers more broadly – you see CC payment options for most online purchases, but you almost never see e-transfer options… even though they’re functional for regular person to person payments. Having a business email setup with an auto deposit isn’t too difficult – as noted, many small contractors go this route – but its not common at larger businesses… for no particular reason.
All that on item 2, is basically to say you need to get most businesses to adopt a ‘standard’ method for online payments. If every shop you went to had a different ‘payment app’ you had to download, create an account, transfer money to the account, to use the account… it wouldn’t have general end user appeal due to its burden. Credit cards have a simple, ubiquitous standard that’s got a ton of apps and plugins to accommodate – we’d need similar embracing of a, general industry/economy/nation wide approach.
All of these things are do-able, if there’s political will. But only if there’s political will. If you look at the financial industry, they’re generally in bed with US/foreign tech companies these days. Even our govt is run on Microsoft. Getting people to move away from American options would require clear messaging from regulators of “critical infrastructure” industries (like banking), and potentially options for government support as part of those tech migrations (tax breaks to hire specialists/retrain people/develop different apps). Like a positive step would be seeing the BC FSA charge huge “insurance” premiums for Credit Unions which are almost entirely in Microsoft’s cloud / US controlled infrastructure. We don’t see any of that currently – instead, we see regulators like the BC FSA shrugging as the industry debates whether online banking portals should be outsourced to a company in Portugal, one in India, or one in the USA (the Canadian CU Trade association, central1, recently walked away from this service area – with their CEO even getting a bloody business in vancouver award for abandoning it). We likely won’t see anything ‘material’ on this front until after the next election at the very earliest, is my guess. But even then, I doubt they’ll put the kind of urgency on it to avoid this sort of thing becoming a potential issue in trade talks.
When I was paying at a local shop recently, I mentioned to the owner I’m trying to pay cash now rather than card because Visa is a US company and he he thanked me, since using a credit card costs them money.
It’s not all or nothing as you have options folks:
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If you still want to use credit cards to increase your credit rating and to receive the cashback you can just Interac/cash/direct deposit for small businesses and charities then use the credit cards for the big guys.
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You can also just boycott Visa, Mastercard, American Express and Discover for the duration of the trade war or the Trump presidency.
Sometimes incremental change is the way to go.
Additional information from Goodsuniteus on the political contributions of the credit processors:
Visa: 51% democrat / 49% republican / very high contribution level.
Mastercard: 56% democrat / 44% republican / very high contribution level.
American Express: 56% democrat / 44% republican / very high contribution level.
Discover: 72% democrat / 28% republican / very high contribution level. (May be acquired by Capital One)
Capitol One: 48% democrat / 52% republican / contribution level very high.
PayPal: 66% democrat / 34% republican / contribution level high.
Apple Pay: 85% democrat / 15% republican / contribution level very high.
Google Pay: 85% democrat / 15% republican / contribution level very high.
Samsung Pay: 63% democrat / 37% republican / contribution level medium. (At least South Korean)
Why do companies put money on both parties? If I’m a candidate and they give money to my enemy it’s like not giving me money at all right? Right?
Good post. This is pretty much what I do.
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Same with mastercard.
Are you 14? This might be the dumbest post I’ve ever read in my life. Like, love the energy bud. Just use your fucking debit card.
I have never seen the option to use or have ever heard of interac in my life.
Interac is something every Canadian is familiar with. Americans have Venmo, etc. We have Interac.
Remember, Google — as opposed to obnoxiousness — is your friend.
Even if we dumped all online transactions and used cash for in person transactions, there isn’t enough cash in circulation. Less than 3% of US dollars are printed on paper. The rest is just numbers on spreadsheets. There is no way we could function without electronic payments. This is true in almost every country that has a central bank that engages in fractional reserve banking.
Did you even read the post? Nowhere does it argue for ditching electronic payments. Outside of the west, alternative payment apps are widespread.
is this the same interac corporation that won’t do anything about their god awful etransfer system? no app like venmo or cashapp? how many years did it take them to implement autodeposit? why do etransfers sometimes take 1 hour?
You’re complaining about something Interac does that credit cards can’t even do? I’ll wait while you send money with Visa by text.
No. I’m comparing interac to Venmo.
Ah, I see. I was comparing Interac to credit cards.
my point is that Interac is not without faults. They have an unfair monopoly over peer to peer transfers of money between banks.
In Brazil, there is no alternative :(
For a huge chunk of the internet there isn’t one either. If Visa/Mastercard suddenly decide they don’t want to do business with you anymore, you’re fucked.
Cryptocurrencies?
I mean, how long would it be until the next fascist Canadian prime minister?
Better to just get the government out of our wallets.
crypto doesnt help, because all of the crypto coins can easily be captured and influenced by big tech. most of them are also super heavily reliant on US tech
looking for a technological solution to a systemic problem is a bad idea really
if you really want to change things, we need to end capitalism
I actually need the cash back I get from my credit card though, it’s more than 1000 per year
But you do understand that if credit card cash backs didn’t exist, prices would likely fall by more than the cash back?
Here is the problem. You’re not going to get the general population to care enough to change their behavior, and then the only people who miss out are the people who are no longer getting their cash back off their whiny self-righteous protest that amounted to less than a rounding error.
Case in point: I live in one of the most liberal cities in the United States. There is technically supposed to be a one month long boycott (lol) of Target right now. Guess the parking lot of which local retailer is still as packed as it always is every day?
People won’t give a shit until they are massively inconvenienced with no alternatives.
People prefer cards over carrying cash though, and you have to kinda work to collect the cashback. Most don’t bother, which is why the system is profitable overall.
Honestly I think you’re better off extracting money from a large corporation you don’t like (if you can, it’s obviously difficult) compared to ignoring them.
For example, if you really hate a company, flood their sales line with nonsensical calls. It’ll usually be a domestic agent for the sales line, and in Australia at least the average cost to answer a call fully loaded, charged by a call centre management company, is around $30AUD. You also increase demand for low paid workers. If you could figure out a way to do this en-masse for a company without annoying the individual agent, you could do some serious financial damage in a way that’s probably legal.
Edit: If I hated a company, and I had a lonely/senile relative, I would give them a special phone where every button on the phone called the sales line. That way the elderly relative gets a chat and keeps their brain active, and you get to cost the company hundreds of dollars a day. The sales agent is also unlikely to be bothered by an occasional chat with a senile person to break up their day.
Yeah that makes sense
No one has enough money, and this trend will get worse as this trade war goes on. Unless you can replace the credit buffer this initiative is a non starter.
To many people are living partly on a credit card, we need to ether replace it with an non american credit card, some other form of credit (LoCs are harder to get at the moment) or find a way to get more money to Canadians.
I nearly asked “What about American Express?”. Sometimes I wonder how I graduated kindergarten.
It’s okay, there are 35(?) countries I believe in America. 1 that gets talked about a lot. Being that they are discussing this from Canada in America, I’d say it’s safe to consider maybe American Express could have been from Canada. Mexico, Argentina, Brasil, and most other large countries in America aren’t English primary, so it would be harder to pass them off.
Discover though, who knows what they are doing
From my experience, all countries in North and South America (except the U.S.) refrain from referring to anything they do as American because they would 100% be assumed to be U.S.
Indeed, it took me a while to realize the other person meant “The Americas,” aka North and South America and not the US, aka “America.”
Mine as well. I also used to spell Brasil with a z, but since Bubba Gump tried to rename the Gulf of Mexico I’m avoiding our naming conventions.
3 times in my life I took out a consolidation loan to corral all those costs and pay them off. Credit cards are both a blessing and a curse. Gov’t should provide credit services at a reasonable, non-compounding, interest rate.
Between credit card companies, finance companies and the banks, the interest they extract yearly would put all the space billionaires to shame.
YES, I ain’t even Canadian but been saying this since day, those 2 companies are such a huge factor in how much leverage this 2 party dictatorship has over majority of the world, that and Microsoft, Apple, Google etc. This is why Cash is King, and using American payment processors just feeds their power and leverage over global finance.
You can see how its affected Russia when US payment processors halted operations as part of sanctions. The only viable alternative is using Monero for online transactions and physical cash.
Monero is the only realistic and promising way of paying people online without relying on the two largest payment processors on the planet, fully under the control of the US.
See, not using Google Pay is something even I, a non-Canadian, European person can do. doingmypart.jpg!
It’s been convenient to use my phone to tap and pay for things. But like, only slightly more than pulling out my debit card. Just got a new minimalistic wallet with a card ejector too so it’s kinda fun to use.
