🚀 Our new App is live!  Signup

💳 The best offers for May! Details 

Advertiser Disclosure

Advertiser Disclosure

Although we put in a lot of effort to give our readers unbiased information, and we include many credit card offers on our website for which we do not get paid any compensation, we are legally required to notify you that we may be receiving compensation from some of the credit card companies mentioned on our website.

Some of the credit card offers which appear on helpmebuildcredit.com are from credit card companies from which this site possibly receives compensation. This compensation may impact how and where credit card offers appear on this site. This site possibly does not include all available credit card offers.

 

Close

Are Credit Card Points At Risk? The Credit Card Competition Act

- Jul 21, 2023 Credit Card Info, News2 comments

Update: This looks to be more serious now [TAKE ACTION BELOW]!

We are so used to the credit card game as we know it. We are all enjoying lucrative rewards and free travel. But two senators out there are proposing legislation that might stop it or cause tremendous hiccups. 

U.S. Senate Majority Whip Dick Durbin (D-IL) and U.S. Senator Roger Marshall, M.D. (R-KS) are proposing legislation which they hope will help expand competition within the credit card processing market in order to lower the swipe fees merchants pay when swiping your credit card.

What is the credit card competition act?

The Credit Card Competition Act will require banks to offer at least two networks that merchants can use to process credit card payments

Did you ever notice the words Visa or Mastercard on your credit cards?

Currently, if it says Visa on your credit card then the merchant (store owner) can only swipe your credit card using the Visa network. Visa can decide how much in fees the merchant should pay and the merchant can do nothing about it. It’s either they pay the fee or not be able to swipe any Visa cards (3.3 billion of them!).

The Credit Card Competition Act wants to force, for example Chase, to not issue their credit card exclusively to Visa. They would need to allow the merchant to decide which network they want to use to process the payment. So with the Credit Card Competition Act, Chase will be forced to allow merchants to use, let’s say, the Discover network to process transactions on Chase cards.

Credit card issuers will be required to allow a minimum of two networks for a merchant to choose from to process payments. At least one of the two networks cannot be Visa or Mastercard (as they are the two largest in the country). 

How does that help anything?

By forcing, for example Chase, to allow merchants to decide which network they want to use to process credit card transactions, you can assume that merchants will choose the cheaper option. This will create a competitive environment in the credit card processing space and hopefully bring down payment interchange costs for small business owners.

What's wrong with the current system?

The two senators sponsoring the bill claim that if the merchants pay less on interchange fees they will be able to pass along the savings to consumers and this will create a more equal opportunity for everyone to save money, not just the rich who are earning lucrative rewards on credit cards (I just coughed a few times). 

How will this affect credit card rewards?

Assuming that all this works out and that credit card interchange fees come down, then that will be a huge hiccup for credit card rewards.

In our interview with David Gold – Former Senior Executive at JPMorgan Chase, he explained that banks usually try to, at a minimum, break even with rewards through the interchange fees. If interchange fees are brought down, so will rewards.

We currently see many cards offering 2% cashback or 2 points on all purchases, such as the Capital One Spark, Amex Blue Business Plus, Citi Double Cash, and more. You can even earn 2.5% cashback for transactions of $5k or more on the Ink Premier card. All this will most likely stop if banks can no longer break even on the rewards through the interchange fees.

But will credit card rewards really be killed?

Even if the Credit Card Competition Act becomes law, I don’t think credit card rewards will come down so fast.

  1. This is a huge shakeup in a multi-billion dollar industry. Even if it becomes law it will take years to implant 
  2. Banks can still choose who processes the payments. So instead of choosing one, they will choose two. But they will still choose only ones that charge enough to cover their cost (So Chase can still say. Listen I need to get 2% in fees. The rest you fight out between yourself. Chase is big enough to easily find a second network willing to work under these terms, etc etc) 
  3. Cards where the network is itself the card issuer (such as American Express and Discover cards) would not be required to add a second network (how long does it take for Chase to open their own network?)
  4. Banks can still put incentives for cardholders to want to use the more expensive processor (extra perks, extra rewards, etc). This will make consumers want to use the more expensive processor and push the store owner to only put through the charge using Visa, etc. The store owners will most likely give in to the consumer (how many store owners do you know that still don’t accept Amex as they are more expensive?) 

But didn't the Durbin act in 2010 kill Debit card rewards?

I don’t understand why a single blog is comparing the two. It’s true that the Debit card act in 2010 killed rewards for debit cards but that was for a completely different reason.  In 2010 interchange fees for debit cards were capped at  $0.21 plus 0.05% of the transaction! That’s a completely different story than the credit card competition act which is not capping interchange fees in any way.

So you cannot compare these two acts. As explained above even if interchange fees are brought down a drop it will not necessarily affect credit card rewards. You cannot compare it to an act that capped debit card fees at just 0.05%!

What's next for the Credit Card Competition Act?

Update: This looks to be more serious now [TAKE ACTION BELOW]!

There was a rumor that the Credit Card Competition Act was going to be included in some hidden amendment for the National Defense Authorization Act for 2023. Fortunately, as of now, it did not happen. It’s currently stuck at the desk of the Senate Banking, Housing, and Urban Affairs Committee which needs to decide what type of action they want to take. The Senate currently has more important things on the agenda and it does not look like anything is happening so fast.

What can you do to stop it?

Send a prefilled message to your state senator and congress member with just a few quick clicks here.

 

Was this article helpful?

avatar_logo
Sam Sam has nearly a decade's worth of experience educating his many readers on everything credit. Sam spends his days checking out credit cards for a full report, from the minute benefit details to the shebang of welcome bonuses. Plus studying the ins and outs of building proper credit. It’s his favorite pastime and he loves sharing it with others.

Leave A Comments

This site uses Akismet to reduce spam. Learn how your comment data is processed.

2 Comments

  1. Per your post, I don’t see a reason it’s should be a issue so why should I contact my elected representatives?

    Reply
    • It just takes a second so why not. It’s always better not to have anything new that can create hiccups. I did it as well

      Reply

Recent Posts

Follow us

Click here to subscribe to
our WhatsApp channel

Today's
best offers

The Business Platinum Card from American Express

Earn 200,000 points after spending $20,000 within the first 3 months.

more info

Capital One Venture X Business

Earn 150,000 miles after spending $30,000 within the first 3 months.

more info

Ink Business Preferred Credit Card

Earn 100,000 points after spending $8,000 within the first 3 months.

more info

American Express Business Gold Card

Earn 130,000 points after spending $10,000 within the first 3 months (terms apply).

more info

You May Also Like

Credit Card Disputes – Know Your Rights

Credit Card Disputes – Know Your Rights

The main benefit as for why I always use a credit card, wherever possible, is because of the option it provides for disputing a charge. It gives me an unexchangeable feeling of security that if something goes wrong I can always dispute the charge. I get asked many...

read more
New Sapphire Preferred Offer. 75k Points!!

New Sapphire Preferred Offer. 75k Points!!

The offer on the card_name just popped up to 75,000 points after spending $4,000 within the first 3 months. There is also an 85k offer available in Chase branches but for that offer you need to spend $6k. (Usually, Chase will match the in-branch offer even if you...

read more
News You May Have Missed Over Yom Tov

News You May Have Missed Over Yom Tov

Yom Tov has come and gone. While you were busy celebrating you may have missed some credit card news that happened within the last 2 weeks. First off, we want to apologize for the posts that regretfully went out on Chol Hamoed / Yom Tov. The posts were pre scheduled...

read more
Credit Card Grace Period Explained

Credit Card Grace Period Explained

We all know that we don’t pay interest on credit card purchases until after the credit card due date. But do you know why? You may answer that the credit card issuers want you to use your credit cards, so it doesn’t make sense for them to charge you interest. That is...

read more
success_icon

Download link sent
succesfully

Got it * please check your promotional inbox
fail_icon

Error sending download link

Try Again