Proposed legislation could kill credit card rewards as we know them

The world of credit card rewards could soon be upended by a new piece of legislation.

Co-sponsors of the Credit Card Competition Act of 2022, Sen. Dick Durbin (D, Ill) and Sen. Roger Marshall (R, Kan.), are seeking legislation to enhance competition in the credit card industry by forcing banks to work with at least one alternate payment network besides Visa and Mastercard. 

They believe this regulation would allow newer (cheaper) alternatives, and merchants would likely choose the payment network with the lowest cost — and then effectively pass those savings with lower prices on to customers.

But, history has shown that customers are left without many benefits. 

One example is the Durbin Amendment of the Dodd-Frank Act which aimed to lower merchants’ costs of accepting debit cards by capping debit interchange fees. A 2015 survey from the Federal Reserve Bank of Richmond found only 1.2% of merchants lowered their prices as a result of the amendment, and more than 1 in 5 raised them.

Critics of the bill argue that it could have the unintentional consequence of actually raising prices for consumers, impacting many families financially, and interfering with an individual’s ability to use their credit meaningfully.

Durbin and Marshall are attempting to bypass the normal legislative process and speed the bill’s passage by introducing it as a potential amendment to a broader defense spending bill. The bill will be considered in the U.S. Senate next week on October 11th.