Credit Card Competition Act Could End Loyalty Rewards Programs, Airlines Warn

Airlines Oppose Proposed Bill That Targets "Mastercard Duopoly" and Aims to Lower Credit Card Transaction Fees, Arguing It Could Slash Fund Revenues and Incentives for Offering Loyalty Rewards Programs

• US airlines, including Southwest and United, are opposing the proposed Credit Card Competition Act, which aims to end what is termed the 'Visa-Mastercard duopoly' by lowering the transaction fees these companies charge. The airlines argue this could lead to the end of loyalty rewards programs as it would cut funds from payment networks who would then be less incentivized to offer such rewards.
• While the bill is aimed at lowering customer costs ultimately passed on by businesses due to Visa and Mastercard's transaction fees (which hover around 3%), airlines contend it could 'completely end' popular rewards programs. Such schemes generate significant revenue for airlines through partnerships with credit card companies.
• The creator of the bill, Sen. Dick Durbin of Illinois, argues that the legislation would hardly disrupt loyalty programs, comparing the situation to the European Union where credit card swipe fees are capped at 0.3%, yet points and miles programs continue to be offered.
• Apart from potential impacts on loyalty rewards programs, the bill is gathering attention amid other financial realities American consumers face: rising interest rates, higher delinquency rates on credit cards and other debts, and growing credit card interest. These factors, in combination with shrinking savings, are resulting in an increasing number of Americans dealing with persistent debt.
• Initiatives that aim to change the financial landscape for consumers, such as the Credit Card Competition Act, emerge as Americans are adjusting to changes in the ways they make transactions - with increasing reliance on mobile wallets and credit cards, and decreasing use of cash. As such, they may face additional charges incurred by businesses struggling to deal with the costs of credit card processing.

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