At a glance

The Credit Card Competition Act of 2023 has made headlines recently, as points and miles enthusiasts have been sounding the alarms for the consequences it could bring.

What is the Credit Card Competition Act of 2023?

The proposed bipartisan bill introduced by two U.S. senators, Richard Durbin, and Roger Marshall, would require that banks give merchants at least one other credit card processing network option other than Visa or Mastercard. The idea is that it will increase competition with other networks, resulting in lower swipe fees. Because Visa and Mastercard hold more than 80% of the market share, they have somewhat of a monopoly. When they raised their fees last year, this bill was introduced.

This means that retailers could choose cheaper credit card processing networks to save money, but this could result in private information becoming vulnerable. Although it is helpful for smaller businesses that struggle to profit from credit card transactions, it would ultimately result in a net negative for the consumer.

Retailers could keep the savings from the lower fees while charging the same amount for goods and services, which harms consumers while helping large retailers increase profits. Those in favor of the bill say that it would lead to lower prices for consumers, but retailers are expected not to pass along those savings and instead keep them to help their bottom line.

How would it impact consumers?

It would severely limit or outright destroy funding for credit card rewards programs. As a result of these changes, credit card issuers would likely restructure their rewards systems and take away many perks, like cash back or bonus point categories. If airlines and hotels were to lose out on the revenue they get from their co-branded credit cards, they could potentially charge higher fares for flights or hotel stays. These changes would likely come swiftly if the bill were to pass. Ultimately, businesses will ensure their bottom lines stay protected at the expense of consumers.

These effects could go further – several jobs revolve around points and miles that could be impacted if this bill were to destroy the current system. And those with poor credit might struggle to find a card they can get approved for. There are already just a few cards on the market that folks with poor credit can obtain, but with lower interchange fees, banks might not be incentivized to offer them credit cards.

How much money would you lose if this bill was signed into law?

It’s unclear just how much people could lose if this bill became law. For points and miles enthusiasts, it could reasonably reach into the thousands. By leveraging welcome bonuses and bonus point categories, many people have hundreds of thousands of points available on each card.

For example, let’s say you have 159,721 Capital One miles. If you redeem these miles through the Capital One Travel portal, these miles would be worth $1,597. However, transferring those miles at a 1:1 ratio to an airline partner could easily get $3,000 or more in value from those points. And that’s just from the Capital One Venture X. This isn’t including other points Chase Ultimate Rewards points or miles from my Delta Skymiles Platinum American Express.

Without these rewards programs, I couldn’t use my points for flights, hotel stays, car rentals, or other travel. I also wouldn’t get statement credits for travel, comprehensive insurance programs, or other valuable perks. You can’t quantify the total value of the rewards program when it’s used strategically. Of course, this is hypothetical and an outlook of the possibility of what might happen. One thing is clear – this will hurt consumers.

Bottom line

It’s unclear what will happen with this bill or if it will reach President Biden’s desk to become law. However, you should be sure to contact your local politicians to discuss your concerns over the bill. The bill will harm consumers while handing more profits to retailers.

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Name: Carolina d’Arbelles-Valle
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