Canada's Finance Minister Joe Oliver speaks during Question Period in the House of Commons on Parliament Hill in Ottawa October 29, 2014. REUTERS/Chris Wattie

TORONTO (Reuters) - Canadian banks and credit card companies have reached a deal with the federal government to cut fees charged to retailers for credit transactions and are likely to announce the agreement next week, according to a source familiar with the talks.

The industry source, who was not authorized to speak publicly about the agreement, said on Friday discussions were completed earlier this week.

MasterCard Canada spokeswoman Serda Evren said reports about a deal were accurate, but the company could not provide further information, and details were likely to come next week.

The Canadian Press news agency, citing unidentified sources familiar with the talks, said earlier on Friday the deal will result in lower interchange fees charged to retailers and service providers for using credit cards, and fees would be capped for an unspecified period.

Consumers could expected to benefit from a deal cutting these fees, said Karl Littler, vice-president, provincial government relations and strategic issues at the Retail Council of Canada.

"Right now, consumers who pay with cash and debit are subsidizing those who pay with credit," he said.

Littler said there are about C$5 billion ($4.43 billion) in total fees paid annually in Canada, with about 80 percent going to banks. He estimated banks give about a quarter of their take to rewards programs.

The potential savings for consumers will depend on how much fees are reduced said Littler, but added: "We think it will be certainly in the hundreds of millions of dollars a year."

A Finance Ministry spokesman said he could not comment on speculation. But Finance Minister Joe Oliver said in a televised interview there would be an announcement on the issue "soon".

A representatives for the Canadian unit of Visa Inc could not immediately be reached for comment.

(Reporting by Jeffrey Hodgson, Euan Rocha and Solarina Ho in Toronto; Additional reporting by David Ljunggren and Randall Palmer in Ottawa; Editing by James Dalgleish and Andrew Hay)