A Bill That Would Result In Us Losing Our Credit Card Rewards

Fuel costs related to the conflict in Iran have sent airlines into a panic as the summer vacation season inches closer—consumers are going to feel the squeeze. Millions of Americans who fly regularly and hold airline travel rewards credit cards rely on points earned from everyday purchases to help pay for their trips. Congress, as usual, is making things even more complicated.

The Credit Card Competition Act (CCCA), introduced in the Senate by Senators Roger Marshall (R-Kansas) and Dick Durbin (D-Illinois), is picking up steam in Washington after an endorsement from President Donald Trump on Truth Social earlier this year. According to the legislation’s sponsors, the goal is to increase competition in the credit card market and reduce so-called swipe fees for Americans.

While competition and lower swipe fees may sound great, the legislation likely comes with side effects, namely a reduction in credit card rewards and perks that banks, working with companies like Visa and Mastercard, can offer customers.

Travelers use every tool available to them to save money. 31 million Americans hold airline travel reward credit cards, and more than half of all frequent flyer miles and points issued in 2023 were generated by airline credit card use. Not to mention that nearly 16 million domestic air visitor trips were booked using points earned on airline-branded credit cards.

Reducing so-called swipe fees as a result of the CCCA means banks take in less revenue per transaction to cover the cost of credit card benefits. Banks won’t simply take a revenue cut lying down, which seems like a point these lawmakers want to make in their demonization of the finance sector.

That may be good politics for Durbin, Marshall and Hawley, but for everyday people, that means paying out of pocket for flights rather than tapping into points or simply opting not to take a big trip at all.

There are other unintended consequences as well. Consumers would likely experience reduced access to credit because when banks’ net revenue declines, their willingness to extend credit to higher-risk customers also declines. The banking industry is interconnected at every turn. Put pressure in one area, and it simply shifts elsewhere, such as late fees and interest.

Then there’s the issue of security. If swipe fees get cut, card security gets riskier as processing occurs through a third party—an added layer of banking encouraged by this bill. After the so-called Durbin Amendment was passed in 2010, it imposed similar mandates on debit cards, and as warned, debit fraud increased by a dramatic 60 percent.

Experts also suggest that bank fees are unlikely to go down for Americans overall, even if the legislation passes. Even if swipe fees are reduced, which again would mean fewer credit card rewards and benefits for American consumers, banks will likely look to other sources of revenue, such as late fees and interest, to recoup their losses.

The CCCA embraces the heavy hand of government by requiring large banks with more than $100 billion in assets to enable at least two unaffiliated card networks, including one other than Visa or Mastercard. Why should the federal government be in the business of dictating to banks what kind of credit card networks they should have to engage in? Certainly, banks are able to do so by choice, but they shouldn’t be forced to by politicians whose motives are unclear at best.

Backers of the legislation pretend that Visa and Mastercard dominate the market. Senator Marshall, for example, calls the pair a “duopoly” even though Visa and Mastercard represent 42 percent and 27 percent of the market, respectively. Visa’s marketshare of the has declined in recent years.

Customers have many other options, including American Express and Discover, as well as the ability to use their debit cards or Zelle. Say what you will about American finance, but a lack of credit card options is not a problem we have.

The Credit Card Competition Act is a classic case of Washington trying to intervene benevolently but showing little interest in how its solution would hurt consumers if implemented. The legislation failed to pass in the last Congress, and if your summer vacation plans are to survive, you should hope it fails to pass in this one, too.