Loyalty rewards programs are a money-saver for women and families, especially in light of elevated inflation. Unfortunately, programs that reward customers with savings and discounts for regularly shopping with them are on the chopping block because of a piece of federal legislation under consideration.
The Credit Card Competition Act (S. 1838 and H.R. 3881) introduced by Democratic Senator Dick Durban of Illinois is like many pieces of legislation coming out of Washington. It may be well-intentioned, but will lead to negative unintended consequences for women, families, and Americans. Sadly, lawmakers may use government shutdown negotiations to advance a bill that might not pass otherwise.
The Credit Card Competition Act aims to enhance credit card competition and choice and reduce excessive credit card fees by requiring the largest credit card-issuing financial institutions to enable at least two credit card networks to be used on their credit cards instead of just one. At least one of those networks cannot be either Visa or Mastercard.
Senator Durbin is going after so-called “swipe fees” or fees paid by retailers that are tacked onto every credit card transaction. He noted:
Every time you use one of these credit cards from Visa or MasterCard, put it in the machine, you’re not only paying for what you’re receiving, you’re also paying a fee that the retailer has to add to the cost of the product they’re selling.
These fees are not just an upside for credit card companies, they serve purposes that help consumers including funding loyalty rewards programs and greater cyber security.
As Mastercard wrote in a letter to Senator Durbin and other congressional allies recently,
Many merchants, including several who have publicly opposed this legislation, leverage payments products to fuel their loyalty programs. These programs are necessary for their profitability to be able to offer value to consumers.
Loyalty programs are popular with Americans. Some 8 in 10 Americans are members of at least one loyalty program. Women are much more likely than men to register (57% vs. 42%) in person and use the rewards program.
Loyalty programs are popular among households up and down the income scale. A whopping 94% of households earning above $100,000 use at least one and 73% of those earning below $35,000 belong to a loyalty program as well. People are looking for ways to offset inflation and half view loyalty programs as more important than ever.
The Credit Card Competition Act would make loyalty rewards programs too costly to maintain. Consumers will lose out at a time when they view loyalty programs as so critical.
Other concerns that those who oppose the bill raise are the cybersecurity issues. Credit card fees fund investments in cybersecurity. Mastercard noted investing more than $7 billion over the last five years to support cybersecurity and identity capabilities to protect payments and digital interactions.
IWV joined three dozen other organizations in opposition to this bill for these and other enumerated reasons. We hope that senators consider the real-world concerns that opponents have raised and stand against this bill.
We appreciate that a number of senators have opposed this bill being snuck into funding measures during recent federal budget negotiations. We must be vigilant to ensure that the Credit Card Competition Act does not advance by other vehicles. Otherwise, consumers will foot the bill.