If you enjoy credit card rewards programs, you might not be pleased with the 2023 Credit Card Competition Act (CCCA).

This legislation, introduced in both the U.S. House of Representatives and the Senate, promises significant changes to how credit card transactions are handled in the United States. Supporters of the bill argue that these changes will lead to lower costs for consumers. Opponents contend that, among other impacts, the same changes will disrupt consumers’ beloved credit card rewards programs.

Who’s Right?

New Requirements for Credit Card Companies

According to a summary by one of the bill’s sponsors, Senator Dick Durbin (D-IL), the CCCA will:

• Require banks issuing credit cards with assets exceeding $100 billion to provide at least two credit card networks (instead of just one) for processing all their credit card transactions.
• Require that at least one of the two networks allowed on each card is a network other than Visa or Mastercard, such as American Express, Discover, or some smaller companies.

When a consumer makes a purchase with a card, the merchant (not the consumer) decides which of the two networks associated with that card will process the transaction.

Cards issued by processing networks (like American Express or Discover) rather than banks do not need to add a second network to their cards, but they can add a second network to cards issued by banks.

Durbin argues that these changes will spur more competition among card processing companies, aid small businesses, and lower costs for consumers.

Potential Issues

While the promised benefits may sound attractive, there is another side to this story.

Ten organizations representing banks, credit unions, and card payment processors wrote a joint letter to congressional leaders, stating that the CCCA will increase costs for card issuers and harm consumers by reducing the number of card issuers. This could limit consumer choice in preferred credit card networks and restrict credit card rewards programs.

“The adverse effects of this bill are clear: less choice for consumers, greater threats to consumer data and privacy, weakened community banks and credit unions, and the disappearance of credit card rewards programs used by families across all income levels to expand their budgets.”

— Joint letter to Congress, June 9, 2023

Another issue is that the technology to route transactions through two different networks from a single card is not currently in place. Expedited adoption by card issuers could be costly and inconvenient for consumers.

“Every time a network is added or changed to meet merchant needs, hundreds of millions of new chip cards must be issued, creating inconvenience for cardholders, exposing them to identity fraud via mail theft, and increasing the costs of payment systems,” the letter continued.

The letter also notes that merchants and consumers benefit significantly from the current bank card system. Transactions are nearly instantly authorized, cleared, and settled, and card issuers absorb most losses from fraudulent transactions, while merchants receive full payment for their goods and services.

Who Stands to Benefit?

The million-dollar question — who stands to benefit from the CCCA? — is not easily answered.

Merchants argue that they pay too much in fees to the card networks for processing credit card transactions. From the perspective of merchants, this may be true, but the CCCA does not actually mandate lower fees.

The requirement to add a second network could create a choice of lower-cost options or eliminate incentives for lower-cost networks currently required to provide more access. With expanded access, lower-cost networks may decide to raise their lower costs to match larger competitors.

“The adverse effects of this bill are clear: less choice for consumers, greater threats to consumer data and privacy, weakened community banks and credit unions, and the disappearance of credit card rewards programs used by families across all income levels to expand their budgets.”

— Joint letter to Congress, June 9, 2023

Merchants dissatisfied with current fees for payments on these networks can choose not to accept these credit cards. This may inconvenience customers, but customers can also choose the card they wish to use.

At the same time, banks are likely to face large costs for each card to introduce multiple networks and after systems are in, th cost high of these new networks is the massive cost is technical. increase Furthermore.