A new ad campaign by Visa is drawing the ire of retailers and small businesses across the country.  Smallenfreuden, or the joy of small, is Visa’s attempt to get consumers to use their credit card for small purchases under $100.

The ‘small’ purchase segment is dominated by debit and cash users, and retailers would like to keep it that way.  The Canadian Federation of Independent Business says you add two to three percent to the transaction cost for the vendor each time you use your credit card.

Go Smallenfreuden or Go Home

If you ignore the fact that smallenfreuden is a stupid, made up word started by a giant credit card company who’s trying to get you to spend more, you’ll find the premise is actually not that bad.  Here’s why:

Call me selfish, but when I decide which method of payment to use, I want the one that’ll cost me the least or pay me back the most.

That’s why I use the Scotia Momentum Visa Infinite card when I shop at Safeway or when I fill up at Shell – to get 4 percent cash back on everyday purchases like groceries and gas.  I don’t care if my bill is $3 or $300, I’m getting that 4 percent back.

You know how much I’ll get back when I use cash or debit?  Nothing.  In fact, if you’re one of many Canadians who bank with the big 5, using your debit card a lot can cost you $14.95 per month or more.

I used to pay for everything with debit, and it cost me big time!  Now, instead of paying $14.95 per month in bank fees I use my cash back credit card and earn at least $50 per month in cash back rewards.

Related: How To Boost Your Credit Card Rewards 

My spending habits haven’t changed – I’m just using a different card.

Added costs for Retailers

Most retailers prefer it when you use debit because the cost per transaction is substantially lower.

Retailers pay a membership fee to Interac based on the number of transactions they process each year.  In 2013, the fee is $0.006534 per transaction, or $65.34 per 10,000 transactions.

Dealing with cash can be a nuisance.  From bank deposits to account reconciliation to rolling coins – not to mention theft, there’s a cost to handling cash.

But credit cards cost retailers the most per transaction because of steep interchange fees imposed by Visa, MasterCard and American Express.

A Bank of Canada survey looked at the cost of processing a $36.50 transaction – the median cash transaction in its survey (how smallenfreuden).  The costs broke down like this:

  • Debit card: 19 cents, or 0.52 percent
  • Cash: 25 cents, or 0.68 percent
  • Credit card: 82 cents, or 2.24 percent

The same survey also broke down how we pay for our transactions:

  • Credit card: 31 percent of transactions
  • Cash: 29 percent of transactions
  • Debit card: 26 percent of transactions

What’s in it for me?

The CFIB wants to play the David versus Goliath angle, claiming BIG CREDIT CARD just wants to take a larger bite from mom and pop shops, so they’ll have no choice but to raise prices.

But we all know these costs are baked into the price of goods sold anyway, whether it’s Ma and Pa’s dry cleaning, or a giant retailer like Wal-Mart or Superstore.

Related: I Hate Paying Fees

If I were to put that same $36.50 transaction on my credit card, I’d earn $1.46 cash back (at a grocery store or gas station).

Those who say that the increasing popularity of rewards credit cards have caused prices to go up may be right.  But you’ll still pay the same price whether you use cash, debit or credit.

So we’re left with the choice of putting some much needed cash back in our own wallets, or helping retailers save an extra few cents.

As dumb as it sounds, I’m going to keep smallenfreuden my way to savings.


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