A proposed bill seeking to impose network routing requirements on banks that issue credit cards would be disastrous for consumers, especially the millions of people who get immense value from cash-back and travel rewards on credit card transactions, writes Brian Kelly, founder of the popular loyalty programs, credit cards and travel news site The Points Guy. In a new column on the site, Kelly criticizes the recently reintroduced Credit Card Competition Act by Sens. Dick Durbin (D-Ill.) and Roger Marshall (R-Kan.) for putting the interests of big-box stores ahead of customers by allowing retailers to choose cheaper, less-safe credit card processing networks. (A companion bill also was introduced in the House.) He also urges consumers to voice their opposition to the bill.
“Simply put, it would kill the funding for credit card rewards programs and allow retailers to pocket the savings from lower interchange fees (also known as swipe fees),” Kelly writes. “With lower fees collected, consumers would lose out on rewards, purchase protection and fraud protection while retailers add to their bottom line.”
Kelly notes that a similar situation played out a decade ago with the passage of the Durbin amendment to the Dodd-Frank Act and its restrictions on debit transactions. Debit card rewards programs vanished, harming lower-income customers who may have a hard time getting approved for credit cards, he writes. A Federal Reserve study found retailers didn’t pass on the savings to customers but instead held prices steady or—in many cases—increased prices.
“The retail lobbyists are trying to convince consumers that this would lead to lower prices; however, we know that retailers won’t pass along those savings, because we know the impact of the Durbin amendment, and it was a huge loss for consumers,” Kelly writes.