Recent coverage in a few Canadian publications entitled Businesses say credit card companies sneaking in fee hikes explains how the rise of rewards cards and their higher interchange rates is hurting merchants.

“What happens with these fancy cards, the merchant fee for it is already a percentage of the transaction, but this percentage has increased,” said Andreea Bourgeois of Moncton, the director of provincial affairs for New Brunswick for the Canadian Federation of Independent Business.

“One increase occurred in June … Starting next week, the merchant is going to pay higher fees.”

Not only will the basic interchange fee rise – somewhere between 0.46 cents to 0.71 cents per $1 spent, using a reward charge card will bring an additional processing fee of 0.3 per cent to the merchant.

Businesses in the US actually have it quite a bit worse, where a normal transaction costs between 1.50 and 2.20 cents per $1 and rewards cards can add another .30 to 1.00 cents.  Unfortunately for US merchants, the credit card processors often take rewards cards as an opportunity to increase their margins by passing along *more* than the amount that Visa and Mastercard have increased rates.  The best way to avoid that trickery is to use Interchange Plus pricing.