The credit card industry as we currently know it may be dramatically changed by proposed federal legislation, if not entirely eliminated.
It might fundamentally alter the rewards ecosystem if passed, which would have an impact on your ability to accrue (and use) points and miles for travel or cash back that you can use to offset some of your regular expenses.
The Credit Card Competition Act of 2022 did not eventually make the draught National Defense Authorization Act (NDAA) for fiscal year 2023, despite their having briefly been some worry that it may be added as an amendment to a recent defense budget measure.
However, increased apprehension was expressed about the likelihood of inclusion by those in the credit card sector, as well as by airlines, hotel chains, and (of course) regular travelers.
Here at, we show you how to maximize your rewards so that, for example, you can receive 3 points for every dollar spent on dining out, 4 points for every dollar spent on groceries, and 5 points for every dollar spent on flights.
The opportunity to travel more frequently — or in more comfort — and explore the world is made possible by utilizing these rewards and the benefits of well-known credit cards.
However, it can also result in more money in your pocket, a better airport experience, and the advantage of purchasing protections that are not available with other payment options.
If this legislation is passed, everything could change.
We've put together this primer to assist address your questions about the proposed legislation, including what it would do and how it would affect passengers — and your well-earned rewards.
What is the Credit Card Competition Act of 2022?
The Credit Card Competition Act of 2022 was introduced on July 28 by two U.S. senators, Richard Durbin of Illinois and Roger Marshall of Kansas.
It was subsequently offered as a proposed amendment to the NDAA in October after two months of inaction, however — as we stated previously — it ultimately didn't make it into the text of the bill.
The proposed legislation, as its name suggests, intends to increase competition in the credit card sector in order to decrease the costs retailers must pay when customers swipe their credit cards.
According to a bill summary provided by the Congressional Research Service, if passed, the law would amend the Electronic Fund Transfer Act by instructing the Federal Reserve to require credit card issuing banks to provide a minimum of two networks for merchants processing electronic credit card transactions.
It even expressly forbids Visa and Mastercard, the two networks with the current biggest market share of cards, from holding such positions.
According to a news release from the bill's sponsors, these two businesses processed approximately $3.5 trillion worth of card transactions in 2021 and earned more than $77 billion in American merchant credit card fees.
Credit card companies, which charge merchants a fee for accepting credit cards from customers at their locations, rely heavily on interchange or swipe fees as a source of income.
Every time a customer uses a credit card to make a purchase, the merchant is charged, however the actual amount depends on the type of card used, the nature of the transaction, and other factors.
A merchant may be charged a fee of 3%, or $3 of the $100 purchase, if you go out to eat and use your credit card to pay the bill.
This is a major factor in why some businesses have started charging surcharges to customers who don't pay with cash.
According to a Nilson Report, the total amount of these fees last year was almost $137 billion.
However, fees paid by retailers have actually decreased recently as a share of transaction volume.
According to Nilson statistics from 2019, 2020, and 2021, this rate has decreased for all transactions made using credit cards and private-label cards from 2.19% to 2.167% to 2.166%. (those tied to a specific retailer and not usable at other merchants).
What does this bill seek to achieve?
The Dodd-Frank Wall Street Reform and Consumer Protection Act's clause requiring merchants to use at least two independent debit card networks when routing transactions is one example of a previous attempt to reduce the transaction fees levied against businesses. This legislation builds on those earlier efforts.
A Durbin-added provision was also included in Dodd-Frank.
The rule, which eventually came to be known as the "Durbin Amendment," set a fixed fee for processing debit card transactions (previously, the fee was derived based on a percentage of the total transaction).
The proponents of the measure contend that the legislation will increase competition among credit card exchangers since, according to the Federal Reserve, Visa and Mastercard account for more than 83% of all general-purpose credit cards.
With regard to the big banks in New York City, Marshall claimed that "convenience stores, gas stations, and other small businesses in Kansas are being taken advantage of by Visa and MasterCard at a time when they, and the communities they serve, are grappling with crippling inflation and staring down the barrel of a looming recession."
"The core of capitalism is competition, and our bill will foster competition."
Many people are sceptical about the senators' claims that their plan will assist lower swipe fees while lowering costs for both merchants and customers.
Would those attempts be successful?
It's unclear, however data from the 2011 debit card regulations introduction reveal conflicting findings.
According to a University of Pennsylvania study, banks exposed to the new ceiling on debit card interchange fees had an annual revenue decline of $6.5 billion, demonstrating the Durbin Amendment's unmistakable effect on lowering costs for retailers.
The same study did point out that banks completely made up for this loss of revenue by boosting other account fees, as opposed to simply absorbing it.
In particular, it discovered that the Durbin Amendment had the following results:
• The percentage of free basic checking accounts with no minimum balance limitations fell from 60% to 20%.
• The average monthly charge for a checking account jumped from $4.34 to $7.44.
According to the study, low-income consumers who do not have account balances equal to the monthly minimum required for these fees to be waived "disproportionately" pay these fees.
The law increased the number of unbanked people in the United States by roughly 1 million people, especially among lower-income consumers, according to a George Mason University article that emphasized this same movement.
Actually, according to the report, the Durbin Amendment would "transfer $1 to $3 billion annually from low-income individuals to large businesses and their stockholders."
Last but not least, there is minimal evidence that retailers pass on their cost savings to customers, according to a 2015 economic assessment by the Federal Reserve Bank of Richmond.
After the new laws went into effect, the majority of respondents (77.2%) said they kept their prices the same, while a size able portion (21.6%) actually raised their rates.
Just 1.2% of companies passed on lower rates to customers.
"The cost-savings from the Durbin Amendment flowed to the bottom lines of stockholders and merchants, not consumers,"
What does this mean for rewards on credit cards?
If past experience is any indication, this law might have a significant effect on the rewards ecosystem, which includes programs affiliated with banks and well-known airline and hotel chains that depend on cobranded card partners as a major source of income.
The Durbin Amendment's unexpected result, according to Kelly, "was that it boxed out benefits for lower-income and subprime cards."
"Across America, debit card rewards were destroyed by it."
It's possible that history may repeat itself if this measure affects credit cards in the same way that the Durbin Amendment affected debit cards. Credit card issuers may be forced to drastically curtail (or perhaps cancel) their rewards programs on purchases as a result of lower interchange revenue.
According to a study by the Electronic Payments Coalition, card issuers have lost $106 billion in swipe fees from debit card transactions since the Durbin Amendment went into effect in 2011.
According to another analysis by the International Center for Law & Economics, large banks' yearly earnings were reduced by $6.6–$8 billion as a result of the cap on interchange fees for debit transactions.
The reduction of free checking accounts and reward programs was directly caused by the loss of revenue.
According to a 2012 survey by Pulse and quoted by the Federal Reserve Bank of Richmond, more than half of debit card issuers covered by the cap stopped their rewards programs in 2011.
According to Kelly, "This law would take away rewards from consumers since credit card companies would no longer be able to fund the programs and the advantages we've all gotten accustomed to. This would take value away from consumers and put it in the pockets of merchants."
Who would profit if the bill will pass, and who would not?
Merchants would stand to gain the most from the legislation.
By requiring banks to provide a second choice for processing a certain credit card transaction, businesses might choose the less expensive network, cutting the out-of-pocket expense of that transaction.
According to Jeff Brabant, senior manager of federal government relations at the National Federation of Independent Business, "Competition will result in cheaper fees, which have progressively sliced into the razor-thin profit margins of small enterprises."
"NFIB appreciates... this significant law, which intends to foster competition by giving small businesses the opportunity to select from a variety of credit card processing networks."
However, this shift is being pushed for by a variety of organizations.
Big-box retailers stand to benefit the most.
It is not unexpected that on September 14, over 1,700 businesses, including Target and Walmart, sent a letter to Congress in support of the bill.
The Durbin Amendment had an impact on debit card rewards programmes, and opponents of the measure worry that it will have a similar impact on credit card rewards programs.
The possibility of receiving rewards for debit card transactions virtually vanished in the years after Dodd-passage. Frank's
Another effect of the Durbin Amendment, as previously mentioned, is that it might result in higher costs for a range of other banking products, such as checking accounts.
Banks may need to impose new yearly costs to maintain these privileges for clients because lenders depend on swipe fees to provide rewards for credit card users, according to Dan Perlin, an analyst at RBC Capital Markets, who spoke with Bloomberg.
Lower interchange fees would have a direct impact on banks' profits because they use this money to improve their services and give part of it to customers in the form of incentives.
Ironically, this might even damage people who have never used a credit card.
Brett Buckner, managing director of OneMN.org, a public policy advocacy organization focused on racial, social, and economic fairness, cautioned that "marginalized communities will pay the price" when credit card firms try to defend their bottom lines.
Banks that issue credit cards will now start boosting interest rates, fees, and credit requirements in an effort to save money and limit access to people who are considered credit risks.
Unfortunately, individuals with the lowest incomes will bear the brunt of the burden.
Low-income cardholders are disproportionately impacted by higher interest rates, fees, and credit standards even while rewards programs are frequently used by high-income spenders who don't carry over any balances and consequently don't have to pay interest.
Aaron Klein, a senior scholar at the Brookings Institute, a liberal think tank, claims that "payment methods are connected with income: lower-income persons are more likely to use cash, pre-paid or debit, whereas higher-income use credit cards."
According to a 2022 study by the U.S. Government Accountability Office, households with low incomes, lower levels of education, and members of minority groups are less likely to have bank accounts, which are crucial for a household's financial stability.
High fees, minimum balance restrictions, and other factors have been mentioned as reasons why people don't have bank accounts.
Travel agencies, though, are a different group that can suffer.
Cobranded credit cards, such as those that provide benefits in particular loyalty programs, are also potentially at risk, according to industry groups like Airlines for America, a trade association that represents major North American airlines like United, American Airlines, and Delta.
In an Oct. 11 letter to Congress, A4A stated that the proposed legislation would "unnecessarily increase the annual fees involved with participating in these programs, or otherwise undermine our ability to reward the loyalty of our most ardent consumers."
"We are particularly concerned that the legislation will favor networks that make the smallest investments in technological innovation and fraud protection, endangering the financial security of our cherished consumers," the statement continued.
Are credit card fees more detrimental to veterans?
As previously mentioned, the Credit Card Competition Act was first introduced as a standalone bill about two months later. The two authors then submitted the bill as a proposed amendment to the 2023 NDAA in the hopes that it would be considered for the floor for a vote as part of the annual defense spending bill.
Even while it appears that the Credit Card Competition Act has little to do with a defense budget bill, lawmakers frequently use amendments as a method to go around the regular legislative process and perhaps hasten the approval of a bill by attaching it to a bill that is likely to succeed.
When a piece of legislation is unlikely to succeed on its own, using this tactic can be effective.
However, there is only a shaky connection between commercial exchange and the military forces.
The board chairman of the Electronic Payments Coalition, Jeff Tassey, stated in a news release on October 3 that "this legislation has nothing to do with defense spending."
The Electronic Payments Coalition, which is made up of community banks, credit unions, payment card networks, and other financial institutions involved in the electronic payment process, has been vocally opposed to the measure and has signed a statement opposing it with more than 140 other groups.
Several organizations, notably the Credit Union National Association, or CUNA, officially opposed the proposal, citing its lack of relevance to the military bill as one of their reasons.
The letter claims that while the CCCA won't boost competition in the credit card market, it would benefit multinational businesses at the expense of customers and neighborhood financial institutions, especially those that lend to service personnel.
Interchange fees are really charged on all credit card transactions made in the United States, not only those at military commissaries.
What are the next steps for this bill?
The solo version of the measure is unlikely to go out of committee in its current form.
Sen. Sherrod Brown, D-Ohio, the chairman of the committee, has not issued a call to action since the topic was assigned to his committee in July because it has authority over it.
The draught NDAA law (and its staggering 900 amendments) will likely be debated into October, but it doesn't appear probable that it will advance as part of the NDAA.
After the midterm elections in November, a final vote will take place.
Even said, Durbin has already employed the amendment strategy (that was how the Durbin Amendment to Dodd-Frank came to be), and he might do it again in the not too distant future.
The budget plan for fiscal year 2023, which is scheduled to be debated later this fall and must be passed to prevent a partial government shutdown, is the second top legislative priority for Congress in the final months of the year aside from the NDAA.
Similar to the NDAA, the current CR funds the federal government until December 16, 2022, and lawmakers frequently propose a number of revisions to this funding package.
It will be up to the Senate Banking, Housing, and Urban Affairs Committee to decide whether to take any action on the standalone bill if the Credit Card Competition Act is not approved as an amendment to the NDAA or the broader funding package.
This, however, would most likely not take place until 2023, following the start of the 118th Congress, which begins on January 3, 2023.
In conclusion
The Credit Card Competition Act of 2022 may be included in the NDAA budget bill, reigniting discussion of the proposed legislation. It is now more crucial than ever to comprehend the full implications of what might occur if the bill were to become law.
Among the numerous groups having a stake in this cause, our company was founded in part on the idea of using credit card rewards programs to assist travelers save money on travel.
Although we work with significant credit card issuers, our employees and millions of readers have personally experienced how rewards programs open up travel opportunities that otherwise wouldn't be possible.
By facilitating travel, we assist our audience in expanding their horizons, opening their minds, and engaging with various cultures—all of which would be at risk with the passage of this measure.
By allowing shops to keep the interchange savings, Kelly added, "this would be devastating for customers, especially those who gain enormous value from incentives and protections on credit cards."
Retailers would boost their profits while consumers would lose out on rewards, purchase protections, and fraud protections.
However, proponents of the legislation, such as the Merchant Payments Coalition, feel that businesses should have more control over how they handle credit card payments, including the option to select networks with cheaper transaction fees.
Doug Kantor, general counsel for the National Association of Convenience Stores and a member of the MPC Executive Committee, stated in a statement that "this historic law would abolish a component of the Visa-Mastercard duopoly that has prohibited competition for decades."
"Exorbitant fees that have escalated could finally be brought into contact with reality by mandating card networks to compete over who gets to handle a transaction."
History has shown, however, that any reduction in these fees could end up being a windfall for businesses and ultimately result in higher prices for consumers.
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