You may have heard in recent weeks about the new Bipartisan Bill named the Credit Card Competition Act that’s making its way through the US Congress. To summarize its contents, lawmakers are hoping to introduce legislation that would require major banks to process credit transactions on two or more networks. The kicker? One of those companies can’t be Visa or Mastercard.
At first glance, this could be good. It might increase competition and in turn drive down credit card charges, passing on savings to the consumer and the retailer. But we’re a points newsletter, and it our take is that it could be disastrous for that side of things.
Many of the amazing benefits we earn through credit card usage is funded using these fees. It’s a way to make the cards more competitive in their own right, and with a chunk of the big names’ profits headed to smaller platforms, it’s very possible that loyalty programs could be scaled back considerably. In their place could come higher interest rates, more fees, and stricter decisions on who can even receive a credit card.
In reality, most reward and loyalty program users fall into a high-income bracket. While they could lose some of their benefits, lower income card users, who also carry balances more are going to take the heavier brunt of the fees. While it’s unlikely to be law anytime soon, it’s something to keep an eye on as it develops.