First commissioned by the Consumers' Association of Canada (CAC) in 2009, the most recent survey in a series of annual Angus Reid polls reveals that 84 per cent of Canadians oppose merchant-imposed surcharge fees on credit card purchases.

Canadian retailers pay about $5 billion annually for credit card acceptance fees that comprise interchange, network and service charges. Below are seven key reasons why consumers reject paying transaction fees to help defray that huge transaction-processing bill.

Reason No. 1: They're responding to misleading survey wordings
In an email to CreditCards.ca, the Competition Bureau's Greg Scott called the survey questions' rubric "fundamentally flawed and misleading."

Scott dismissed as false survey language that the Competition Bureau "... would transfer the responsibility of paying this $5-billion from merchants to consumers, in the form of surcharges on purchases made with a credit card," and that Canada's competition watchdog "... is pushing to have consumers pay a usage surcharge that is currently being paid for by retailers."

In December 2010, the Competition Bureau filed a legal action seeking to end anti-competitive merchant restraints imposed by Visa and MasterCard that allegedly prohibit Canadian retailers from:

• Encouraging consumers to use lower-cost payment methods.
• Declining to accept credit cards subject to higher card acceptance fees.
• Applying surcharges when customers use more expensive credit cards.

Two gargantuan credit card companies, Visa and MasterCard, process more than 90 per cent of all Canadian credit card transactions, representing over $240 billion in purchases during 2009 alone.

Reason No. 2: Consumers fear higher prices
Visa and MasterCard processing fees cost merchants between 1.5 to 3 per cent of the transaction price, and even more for premium credit cards. When shoppers charge $100 on most standard credit cards, retailers receive only $97 after the system deducts 3 per cent for card acceptance fees.

If merchant surcharges were allowed, Canadian retailers could mark up prices to $103 for credit card purchases, while leaving prices unchanged at $100 for other payment methods.

The Competition Bureau argues that retailer surcharges drive down inflated costs for card processing via fair market competition. That notion of downward cost pressure is consistent with the 2009 CAC study finding that 83 per cent of Canadians would very likely change where they shop to avoid paying credit card surcharges.

Reason No. 3: Card processing fees are hidden
A fact sheet on the Competition Bureau's website claims that retailers are currently forced to embed their card acceptance fees into store prices -- a practice sure to anger shoppers paying with cash. In an interview with The Canadian Press, Dan Kelly of the Canadian Federation of Independent Businesses agreed that many consumers are shocked to learn they're already paying credit card processing fees that are "... buried in the cost of service so people feel better about it."

Kelly, senior vice-president of legislative affairs at CFIB, added that credit card processing fees have spiked by 30 to 40 per cent in the past few years, hitting small businesses particularly hard.

Reason No. 4: Consumers are unaware of surcharges
Perhaps the most troubling aspect of merchant surcharging is the Angus-Reid survey finding that 86 per cent of respondents were unaware of the current surcharge debate. One reason for Canadians not being up to speed on surcharging is that the Competition Bureau's communications are filled with legal jargon.

Consumers have a right to know about card processing costs that can exceed 3 per cent, compared to a flat fee of about 12 cents for each Interac debit card transaction. A 3 percent credit card processing fee on a $400 set of snow tires costs $12, compared to the debit card transaction fee of 12 cents.

Reason No. 5: Mistrust of merchant surcharge pricing
The Competition Bureau asserts that surcharging outside Canada has led to lower processing fees and cheaper consumer prices. However, the CAC points to contradictory evidence suggesting that credit card surcharges foster retailer price gouging.

Merchant-imposed surcharges are allowed in Australia and the United Kingdom. A 2010 study from Choice, an Australian Consumers' Association service group, concluded that some merchants now charge 10 per cent or more for credit card surcharges. Those retailers use surcharging as a new revenue stream, rather than to recover card processing costs. Similarly, The Sydney Morning Herald reports that the British Consumers Association is leading the fight against rampant surcharge price gouging in the United Kingdom.

Reason No. 6: Perceived loss of consumer choice
Another Angus Reid survey question implied that surcharging empowers Canadian merchants to reject or restrict certain forms of customer payment. Eighty-two per cent of respondents opposed that notion.

In fact, the Competition Bureau's original legal action document confirms its focus on fair business practices, including the full disclosure of credit card transaction fees. This transparency enables consumers to choose whether or not to pay with premium rewards credit cards, lower-cost credit cards, debit cards or cash.

Reason No. 7: Lack of payment method discounts
Retailers could fight back against high credit card processing fees by offering price discounts to consumers who pay with lower-cost credit cards, debit cards or cash. Personal finance expert Gail Vaz-Oxlade agrees that cash or debit card discounts at checkout reduce participating retailers' expenses.

In contrast, merchant associations argue that checkout discounts for consumers paying with debit card or cash are too complex to implement.

CAC president Bruce Cran rebuts the retail industry's position in a press release posted on the consumer association's website, "How can a merchant complain that discounting at the checkout if a consumer pays with cash or debit is too complicated to implement, but then turn around and embrace surcharging? Both are simple functions. The difference is that surcharging is a potential new profit centre for merchants."

See related: The hidden costs of premium credit cards; 5 things consumers need to know about credit card transaction fees.