Chapter 7 - Money and the Canadian Banking System

http://www.vancouversun.com/business/debit+cards+credit+cards+expect+higher+prices/2342124/story.html

Summary

Rumors say that there is a hidden fee within the credit card system which will eventually be allocated with debit cards. Although the rate is around a few cents per transaction, however, they can quickly add up to become a significant amount of money. Canada’s retail merchants experienced an estimated last year of 4 billion dollars in hidden credit card fee. Merchants are also concerned that they are charged more from accepting premium cards such as the gold, platinum, and travel cards. Consumers are usually automatically upgraded to premium cards by their financial institution. Finance Minister Jim Flaherty said that a voluntary code that will prevent financial institutions from doing this has been introduced last month.

Connection

The fact that credit cards are one of the most popular ways of payment in Canada, there will surely be a problem when the hidden fee is associated with debit cards also. It is clearly that people find it more convenient to use credit or debit cards as a payment because they are easily divisible and portable. Merchants will face many more problems as people begin to use credit and debit cards more often. It will create more problems, and retailers will rather accept paper currency instead of accepting credit or debit cards as a payment.

Reflection

I believe it is pretty ‘shady’ how these hidden fees are used while consumers have no idea that they even exist. With the new voluntary code introduced, financial institutions will be unable to automatically upgrade one’s credit card. This will help prevent people to stop paying this hidden fee. I think it is the financial institution’s responsibility to provide all the facts about credit cards to the individual. On the other hand it is also the responsibility of the individual to be aware of these hidden fees by asking questions to their financial institutions.