That\u2019s the warning issued by critics of proposed legislation designed to encourage competition among credit-card networks and make it cheaper for retailers to process credit-card payments.<\/p>\n
First proposed in June 2022 by Sen. Dick Durbin, an Illinois Democrat, the bill was reintroduced this past summer with new bipartisan support. Supporters of the bill, dubbed the Credit Card Competition Act, say it would address a Visa-Mastercard MA, The proposed changes have drawn sharp criticism from airlines, travel firms and financial institutions, who argue the bill would place unnecessary restrictions on payment processing and inadvertently get rid of many credit-card perks and rewards programs. <\/strong>Millions of Americans use those programs to book travel plans, upgrade flight seats or earn cash back on purchases.<\/p>\n Airlines have stepped up their public opposition to the Credit Card Competition Act in recent weeks, with executives pointing to the legislation\u2019s potential consequences for frequent flyer miles.<\/p>\n But could the bill really end up impacting your flight miles and dining points? Here\u2019s what you need to know.<\/p>\n Credit-card issuers make money in three primary ways:\u00a0 through interest and fees charged directly to customers, and through other charges called interchange fees \u2014 paid by the merchants where you use your card, as a percentage of each transaction.\u00a0<\/p>\n Occasionally, shops, restaurants and other businesses charge customers a payment processing fee to help defray that cost, said Brian Kelly, founder of the travel rewards website The Points Guy. Most of the time, they just build it into the cost of doing business.\u00a0<\/p>\n The Credit Card Competition Act of 2023 addresses those so-called swipe fees, arguing that the dominance of the two largest credit-card networks, Visa and Mastercard, has created a duopoly that gives businesses little option but to pay the price they set for swipe fees.\u00a0<\/p>\n In a statement to MarketWatch, Visa said its \u201coverall\u201d interchange fees have remained flat for more than a decade. The company also said it has lowered interchange fees for \u201cthe vast majority of small businesses\u201d in recent years, even as payment volume more than doubled.<\/p>\n \u201cOur industry has never been more competitive and there have never been more payment options for consumers and businesses,\u201d Mastercard wrote in a statement shared with MarketWatch.<\/p>\n The bill, if passed into law, would require the largest credit-card issuers to offer at least two networks over which merchants could process credit-card payments. At least one of those networks couldn\u2019t be Visa or Mastercard.<\/p>\n This competition would lead to better service and lower costs, a summary of the bill argues.<\/p>\n \u201cMerchants have no choice but to accept the outrageous fees if they want to accept credit cards used by their customers,\u201d Sen. Durbin said in a September press conference calling on Congress to pass the act. \u201cIt is long overdue for Congress to break up the sweetheart deal that Visa, Mastercard and the big banks enjoy.\u201d<\/p>\n Critics argue that the proposed network changes would cut into card issuer\u2019s profits, leading them to shrink the rewards they offer customers or drop them entirely.<\/p>\n \u201cIf you reduce the revenue available to the credit-card issuers, the benefit to consumers from a rewards perspective would also have to change,\u201d explained Ed Mills, a managing director and Washington policy analyst at Raymond James.<\/p>\n The airline industry has been particularly vocal in its criticism. <\/p>\n United Airlines \u201cIt would not exist anymore,\u201d he said on the call. \u201cI think it\u2019s bad policy.\u201d<\/p>\n In an interview with Bloomberg, Delta \u201cThose cards could no longer receive the funding to be able to invest in rewards-back opportunities,\u201d he told the outlet. In an email to MarketWatch, a Delta spokesperson stated that Bastian was speaking about his knowledge of others in the industry, and that the airline remains neutral on the legislation.<\/p>\n Airlines for America, a trade association representing major U.S. airlines including Delta, American Airlines and Southwest \u201cRewards cards generate immense value for consumers,\u201d the group told MarketWatch in a statement via email. The proposed mandate would also increase complexity and confusion for card users, Airlines for America said.<\/p>\n Changes to the credit-card rewards system could be particularly challenging for airlines, Kelly, of The Points Guy, said.<\/p>\n \u201cAirlines make more money selling miles to banks (to distribute to cardholders) than they do flying planes,\u201d he said. \u201cIf consumers can no longer earn points, they won\u2019t use airline credit cards.\u201d\u00a0<\/p>\n The Points Guy earns commissions on its credit card, hotel and product referrals, in addition to running paid sponsorships with financial service providers and other brands.<\/p>\n Kelly added that flight miles or dining points may not be the only perks impacted by the potential change. Revenue from interchange fees also helps card issuers offer other services, like extensive fraud coverage.<\/p>\n \u201cFraud protections will be scaled back, rewards will be scaled back,\u201d he said. \u201cConsumers are going to lose, full stop.\u201d<\/p>\n Even if the bill were to pass, it\u2019s difficult to predict just how severely card issuers would scale back rewards, said Ian Katz, managing director at Capital Alpha Partners, a policy-research organization.<\/p>\n \u201cIt could be a serious loss, if this were to happen,\u201d Katz said. \u201cIt\u2019s also just a fact that, for the groups that are making these points, it\u2019s not in their best interest to understate the (potential) impact.\u201d<\/p>\n \u201cIt\u2019s rich that the airline industry \u2014 which generates billions of dollars each year from co-branded credit cards \u2014 is pretending to have hardworking Americans\u2019 interest at heart,\u201d Sen. Durbin wrote MarketWatch in a statement.<\/p>\n Durbin noted that the EU put a hard cap on swipe fees in 2015 and credit-card rewards programs didn\u2019t disappear.\u00a0 But some banks did in fact scale back benefits after that decision.\u00a0The U.K. banned swipe fees in 2017.<\/p>\n Supporters of the Credit Card Competition Act also argue that, even with cheaper payment networks, financial institutions will still use rewards to market to and compete for customers.\u00a0<\/p>\n \u201cRewards are determined by the bank that issues a card, not the network that processes the transaction,\u201d said said Stephanie Martz, chief administrative officer and general counsel for the National Retail Federation.<\/p>\n She called airlines\u2019 criticism of the bill \u201ca scare tactic to mislead Congress.\u201d<\/p>\n \u201cThe amount of revenue banks would lose is a small fraction of total swipe fee collections, far from enough to put an end to rewards,\u201d she said.<\/p>\n It\u2019s unlikely that the Credit Card Competition Act of 2023 will become law this year, Mills said.\u00a0<\/p>\n \u201cAs of right now, the odds are low,\u201d he explained. \u201c(Durbin) has more of a coalition together today, but four senators is well short of the 60 needed for controversial measures to get adopted.\u201d<\/p>\n And some members of Congress just aren\u2019t keen on taking a stance.<\/p>\n \u201cIt pits a local merchant in their district against a local bank,\u201d Katz added. \u201cThere\u2019s quite a few members of Congress who probably would rather not vote on this at all.\u201d<\/p>\n Even if the current bill doesn\u2019t go anywhere, there\u2019s a good chance that the debate over swipe fees will resurface eventually, Mills said.<\/p>\n \u201cThere are well-funded business interests on each side of this debate, and literally billions of dollars are at stake,\u201d he said. \u201cThat\u2019s not something that ever goes away.\u201d<\/p>\n
\n V,
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\n duopoly and lower processing costs for businesses \u2014 and, by extension, help consumers\u2019 wallets.<\/p>\nWhat is the Credit Card Competition Act?\u00a0<\/h2>\n
How could the Credit Card Competition Act affect credit-card rewards?\u00a0<\/h2>\n
\n UAL,
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\n CEO Scott Kirby said on the airline\u2019s Oct. 18 earnings call that the proposed legislation \u201cwould kill rewards programs.\u201d\u00a0<\/p>\n
\n DAL,
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\n CEO Ed Bastian said the bill would result in \u201cunbelievable\u201d consumer backlash.<\/p>\n
\n LUV,
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\n has argued that the act would threaten popular airlines rewards cards. The group launched a campaign, called \u201cProtect our Points,\u201d urging consumers to write to their lawmakers opposing the bill.<\/p>\nWould credit-card issuers actually scale back perks?\u00a0<\/h2>\n
Will the Credit Card Competition Act become law?\u00a0<\/strong><\/h2>\n