Credit Card Competition Act of 2023: The End of Credit Card Rewards

Lawmakers seek to pass a bill, the Credit Card Competition Act (CCCA) of 2023, that’s meant to increase competition between networks that process credit card transactions. This is supposed to lower credit card fees for businesses and, in turn, lower retail prices for consumers.

That sounds great, but the fact is, there’s no guarantee that we, as consumers, will see lower store prices if this bill passes. On top of that, credit card rewards will likely become much less valuable, and we could also lose certain credit card protections.

Let’s see how the CCCA works and what it could mean for you and the future of credit card rewards.

What is the Credit Card Competition Act of 2023?

The Credit Card Competition Act of 2023 started as the Credit Card Competition Act of 2022, but didn’t gain much traction then. The bill was introduced to Congress (the American House Committee on Financial Services) on June 7, 2023. Now, the CCCA of 2023 has bipartisan support and could reach the Senate floor as early as July 26, 2023. The bill proposes to:

• Provide competition in credit card transactions by allowing merchants increased choice in which credit card network to use for each transaction.

Currently, Visa and Mastercard are the leading credit card processing networks in the U.S. Most merchants have to pay interchange fees to financial institutions to process transactions on these networks.

The CCCA aims to introduce some competition into this dynamic of the credit card market. CCCA supporters believe that the Visa and Mastercard duopoly has too much power over credit card swipe fees in the United States.

According to bill proponents, this would “enhance credit card competition and choice in order to reduce excessive credit card fees.” As suggested by the same proponents, lower fees would help save businesses money. They could then pass on the savings to consumers in the form of lower prices.

That all sounds nice in theory. If we can simply save money on the costs of goods and services, why would we even need credit card rewards? But it’s all a little too good to be true.

There’s no guarantee that consumers will actually save money. At the same time, we could lose much of the effectiveness of how credit cards and their rewards currently work. And while the CCCA could help small businesses, it could also help huge retailers.

Here are some potential pros and cons of the CCCA bill:

Pros	Cons
Help small businesses save on interchange fees Help reduce consumer retail costs (no guarantee)	Help huge retailers save on interchange fees Reduce credit card rewards Increase consumer credit card fees Reduce credit card protections

How will the CCCA affect business owners?

Business owners are the most likely to benefit from the CCCA if everything with the bill works out as planned. If business owners could choose between more credit card networks to process consumer transactions, that might lead to lower credit card processing fees.

CCCA proponents suggest that the bill would especially benefit small business owners (Main Street businesses) who currently struggle with credit card costs.

That could certainly be true, but it’s not like big-box retailers wouldn’t benefit as well from decreased transaction costs (probably more so). Bill supporters don’t particularly mention this fact.

How will the CCCA affect credit card users?

The CCCA allows retailers to choose which network to use to process credit card transactions. That could mean going with a more expensive but proven and secure network, or choosing a cheaper and unproven network.

It’s true that Visa and Mastercard currently dominate the credit card transaction market. But are you comfortable with the financial security that these networks provide? They’re well-known, proven networks that provide high levels of security. Moving to another network could mean a lot less security for your financial data.

And, if credit card networks don’t have as much money — money lost from fewer credit card transactions on their networks — that could mean fewer resources spent on fraud prevention.

How will the CCCA affect credit card rewards?

Worst-case scenario, the world of credit card rewards as we know it is gone. Say goodbye to earning the amount of rewards you’re used to earning, which helps offset your everyday costs or save for an upcoming trip.

How do you know we’ll lose our current version of credit card rewards?

Nobody can predict the future, but there’s some pretty compelling evidence that U.S. credit card rewards would likely never be the same:

1. Fees fund rewards: Credit card rewards programs have to make sense for card issuers or they wouldn’t use them. At the moment, credit card companies make a lot of money from credit card transactions called interchange fees, or what a merchant pays a card issuer to accept a payment. Interchange fees often range from 1% to 3% of the transaction cost. These fees help fund credit card rewards programs, so less interchange fee revenue likely means fewer credit card rewards.
2. Debit card rewards: The Durbin Amendment of 2010 capped debit card interchange fees and essentially destroyed debit card rewards.
3. Other countries: Interchange fees were capped in many countries in Europe, and rewards credit cards have suffered. Australia also has interchange fee caps, and its range of rewards credit cards generally doesn’t compare to what we have available in the U.S.

Isn’t the CCCA supposed to lower retail pricing for consumers?

There’s an argument that increasing competition among credit card networks will lower the amount merchants have to pay in interchange fees, which will translate into overall lower costs of goods and services for consumers.

It’s a decent and noble idea. The only problem is that there’s nothing preventing businesses from keeping prices the same (or raising them) even though they might be saving money on interchange fees.

After all, you can’t force a business to lower its prices because it’s saving money somewhere else. So, essentially, the supporters of the CCCA are assuming that all business owners will lower their prices to match the lower cost of interchange fees as a good-faith gesture to consumers.

But do all businesses, including big-box retailers, have their consumers’ best interests at heart when it comes to making money? It’s quite a leap of faith to assume that businesses will lower prices for consumers, which leaves a question mark over whether it would actually happen.

In the worst-case and very probable scenario, the consumer doesn't get lower prices and loses out on valuable credit card rewards and protections.

FAQs about the CCCA

Bottom line

Supporters of the Credit Card Competition Act of 2023 include U.S. Representatives Zoe Lofgren (D-CA-18) and Lance Gooden (R-TX-05), along with U.S. Senators Dick Durbin (D-IL), Roger Marshall, M.D. (R-KS), Peter Welch (D-VT), and J.D. Vance (R-OH).

They suggest it will be good for consumers, but that might not be the case at all. In the end, if the bill passes, it might just be large retailers and secondary payment networks, such as Discover and American Express, that benefit the most.

Consumers could have the most to lose, with no guarantee that retail prices will go down as a result of interchange fee competition. And if we could lose our valuable credit card rewards, too, what do we have to gain?