What is the Credit Card Competition Act? - The Points Guy
The Credit Card Competition Act: Here's where the proposed legislation stands in Congress, and how it could affect credit card rewards.
Today, they reintroduced the Credit Card Competition Act — with additional support from legislators in both the U.S. Senate and U.S. House of Representatives.
If enacted, this bill could dramatically change the rewards ecosystem. It could affect your ability to collect (and redeem) points and miles toward travel or earn cash back that can offset some of your everyday spending.
Here at TPG, we teach you to maximize your rewards so that you can, say, earn 3 points per dollar when dining out, 4 points per dollar on groceries and 5 points per dollar when booking airfare.
Leveraging these rewards and the perks on popular credit cards gives you the ability to travel more frequently — or in greater comfort — and discover the world. It can also mean more cash in your pocket, a better airport experience and the benefit of purchase protections that don’t exist with other payment methods.
If enacted, the law would amend the Electronic Fund Transfer Act by directing the Federal Reserve to require credit card issuing banks to offer a minimum of two networks for merchants processing electronic credit card transactions. It even specifically prohibits these two networks from being those with the largest market share of cards today — Visa and Mastercard.
Interchange or swipe fees are a primary revenue driver among credit card companies, which set fees for merchants in exchange for consumers being able to use credit cards at their establishments. Merchants are charged each time a consumer makes a purchase with a card; the exact amount varies based on the type of card, type of transaction and other elements.
For example, if you go out to eat and use your credit card to pay the $100 bill, a merchant may incur a fee of 3% — which translates to $3 of the $100 purchase. This is a key reason why some merchants have begun adding surcharges for those who don’t pay in cash.
Overall, this totaled approximately $160 billion in card processing fees last year, according to a Nilson Report.
However, as a percentage of transaction volume, this has largely remained flat in recent years. When you compare Nilson data from 2019, 2020, 2021 and 2022, here's how this rate has changed across all transactions processed on credit cards and private-label cards (those tied to a specific retailer and not usable at other merchants).
