Featured Interchange Fee

Why do application bonuses exist in Canada?

To the point Why are there credit card application bonuses in Canada or the United States, but none (or very few) in Europe, for example?

This post is also available in: FR

This is the question I was asked on the Facebookgroup

Interchange fees mean bonuses for you

Interchange” fees are charged by credit card issuers (banks) to merchants so that they can accept a category of credit cards (Visa, MasterCard and American Express).

Here is the definition given by MasterCard:

“Interchange fees are paid by an acquirer to an issuer and relate to a credit card transaction.”

“MasterCard’s average consumer interchange rate is 1.40 percent, which means that for an average $100 purchase made with a MasterCard credit card in Canada, the interchange fee is $1.40.”

“Generally speaking, MasterCard’s rates range from 0.87% (basic “charity” transactions) to 2.69% (remote World Elite card transactions).”

For example, here’s what’s in effect at Mastercard as of August 2021:

Taux interchange Mastercard

On the MasterCard website, for example, you can find out the interchange rate charged by MasterCard. They are classified by card type (basic, world, world elite) and by Canadian financial institution.

These fees are therefore paid by the merchant to the issuing company (the bank). This depends on the type of card used by the consumer. For example, the card types are:

  • Base, World, World Elite for MasterCard
  • Infinite, Infinite Preferred for Visa

All consumers pay this interchange fee

Thus, the interchange fee for each transaction made by its customers is integrated into the product prices.

As a result, all customers are indirectly affected by these fees, without even knowing it.

However, whether you pay with your debit card or your premium credit card , the price will be the same at checkout!

Lightly regulated interchange fees

Screen Shot 2015 09 17 at 1.35.30 PM
It will be rarer in the future to see this type of bonus ….!

A few years ago, there was a complete lack of regulation regarding these interchange fees. These were therefore opaque and could vary according to each merchant.

As a result, credit card companies could afford to offer very generous application bonuses and accumulation rates to new customers. Then they made up for it in the interchange fees charged to merchants.

In 2010, the Government of Canada pushed for a code of conduct to remove the opacity of these fees between merchants and credit card issuers.

Seeing the threat of interchange fee regulation, Visa and MasterCard agreed in 2015 to limit these fees to around 1.5%. In 2021, the government announced consultations on reducing credit card transaction fees. Milesopedia will follow very closely the suggestions proposed to the government.

To give you an example, in France interchange fees are capped at 0.3%. That’s why there are no card offering rewards points or application bonuses!

Credit card bonuses and accumulation rates

That’s why, in Canada and the United States, there are application bonuses and attractive point accumulation rates on credit cards.

For example, World Elite 2% MasterCard card card enjoy one of the best accumulation rates on the market. Indeed, the bank charges merchants 1.48% for contactless transactions.

This rate of accumulation of points compensates in some way for the fees that each client implicitly pays.

However, there are somegreat welcome offers right now, depending on your accumulation goal.


So yes, all this is related to fees that everyone pays, without necessarily knowing it.

You understand the need to have the best credit card and understand the different loyalty programs. This way, you’ll get a return in cash or points on what you pay for each of your purchases!

The one who gets no return is the one who pays with his debit card ! Because, in the end, he will pay the same price as you, but will not have received any benefit from his card .

The system is made this way. As long as this is the case, it is necessary to know our tips to save you money!

Do you also have a question? Don’t hesitate to ask me on our Facebookgroup.

This post is also available in: FR

Come to discuss that topic in our Facebook Group!
Jean-Maximilien is an expert in Canada and France about Loyalty programs, Credit cards and Travel. He is the Founding President of Milesopedia.

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