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Are credit card rewards at risk? Congress eyes swipe transactions

New efforts by Congress and small business owners could change the way fees and rewards for consumers work. It could help one side and hurt another.
Are credit card rewards at risk? Congress eyes swipe transactions
Posted at 2:00 AM, Jul 13, 2023

If you are someone who uses credit card points to travel on the cheap, or cash-back rewards to lower your monthly bills, you may want to pay attention to a current debate in Congress. 

Advocates of credit card rewards say many perks could go away if legislation aimed at reducing credit card transaction fees is passed. 

SEE MORE: Congress takes on professional golf, 'sportswashing'

The debate

Did you ever think about how much using credit cards costs businesses?

Probably not, but Congress is beginning to look at just that. 

Here is what is being discussed:

Every time a credit card is used, there is something known as an interchange fee that kicks in. 

These transaction fees are paid for by the business itself, the price of offering customers the convenience of using a credit card.

Let's say you buy something for $100. Typically, two or three dollars of that is a fee paid by the business.

While the U.S. has four credit card processing networks, some in Washington believe the market is dominated way too much by Visa and Mastercard, creating a lack of competition for businesses. 

Recently Democrats and Republicans joined small business owners outside the Capitol in Washington to introduce The Credit Card Competition Act, which would mandate that businesses have options beyond Mastercard and VISA when it comes to swipe fees.

"There is one place we can't negotiate, and that's with the credit card companies," said Mike Beal, Chief Operating Officer of Ball’s Food Stores in Kansas and Missouri. 

"Small businesses pay the highest swipe fees," he said. 

Beal stressed lower fees would mean greater savings for customers. 

Impact on credit card rewards

But before you say 'great, this will make going to the grocery store cheaper,' Brian Kelly, who is known as "The Points Guy" has something to tell you. 

"Make no mistake, consumers will lose," Kelly said. 

Kelly helps Americans discover how credit card perks, like travel points and cash-back rewards, can help them save money. 

Kelly says any disruption of credit card interchange fees could mean those credit card perks — that perhaps paid for your last vacation — get cut. 

"If you get cash back or rewards or like fraud protection, that's all paid for by the interchange," Kelly said. 

"Points are how many people are traveling these days," Kelly added. 

Kelly isn't just guessing here. 

He says back when Senator Dick Durbin of Illinois passed similar legislation over 10 years ago aimed at reducing debit card fees, incentives to use those cards were quickly dropped. 

Durbin is a main sponsor of the latest legislation. 

"Debit card rewards disappeared almost overnight. Fees on checking accounts went up across the board," Kelly said. Whether or not Congress will actually pass any credit card reform this year is unclear. 

A vote is possible, though, later this month. 

The Merchants Payments Coalition, a group in support of credit card reform, says credit card rewards would still exist if the legislation passes. Officials tell Scripps News that it is the bank that issues a card, not the networks that process transactions, that determine rewards.

The Coalition also says Senator Durbin’s amendment regarding debit cards from several years ago has saved merchants over $100 billion in swipe fees since being adopted.

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