A brewing battle in Congress over credit card transaction fees has airlines like Southwest and United at odds with lawmakers. The proposed Credit Card Competition Act, introduced by Senator Dick Durbin, aims to shake up the credit card payment landscape.
Two Sides to the Story
On one side, supporters argue it could lower fees for businesses and consumers, while on the other, airlines vehemently oppose the bill, fearing it could spell the end of their popular flyer miles programs.
Airlines Wary of the Credit Card Competition Act
Southwest Airlines has been particularly vocal in its criticism of the proposed legislation, calling it “bad policy.”
They argue that the bill could negatively impact their Rapid Rewards Credit Card program, allowing customers to earn redeemable points for various travel benefits, including flights, car rentals, and gift cards.
Ending the Program
Southwest expressed concerns that the act might “undermine if not completely end, credit card rewards programs that millions of Americans rely on for their vacations or personal travel needs.”
Airlines Fear Revenue Cuts
Airlines like Southwest and United contend that the Credit Card Competition Act could have far-reaching consequences.
They argue that the bill would significantly reduce revenues for payment networks like Visa and Mastercard, which may lead these networks to reconsider offering lucrative loyalty rewards programs such as flyer miles.
A Reduction in Revenue
A representative of Southwest Airlines said, “The reduction in revenue from our co-branded credit cards would be substantial and could jeopardize our rewards programs.”
United Airlines CEO Weighs In
Scott Kirby, the CEO of United Airlines, added his voice to the chorus of opposition during an earnings call, stating that the act could “kill” rewards programs and “loyalty rewards are a significant driver of customer engagement and choice.”
84% of US Consumers
Kirby said, “84% of US consumers have some kind of rewards card in their wallet. I bet almost everyone in this call has one, and they like them a lot,” and “Our customers certainly like them a lot. And so I think it’d be hard in Congress to take a vote that 84% of your voters are going to be upset with the outcome of that vote.”
Support for the Credit Card Competition Act
Supporters of the Credit Card Competition Act argue that it won’t necessarily spell doom for loyalty rewards programs.
Still Offered in Europe
Supporters point to the European Union’s successful model of limiting credit card swipe fees to 0.3%, while banks and airlines in Europe still offer points and miles programs to their customers.
Reducing Transaction Fees
Senator Durbin defends the bill, “It’s about leveling the playing field and saving consumers and businesses billions of dollars by reducing transaction fees.”
Senator Dick Durbin, the bill’s primary sponsor, fired back at the airline industry’s criticisms. Durbin also said, “It’s rich that the airline industry — which generates billions of dollars each year from co-branded credit cards — is pretending to have hardworking Americans’ interest at heart.”
Banks Kept in Check
Durblin added, “The airlines have negotiated sweetheart deals with the biggest Wall Street banks at the expense of consumers and local businesses,” and “the credit card industry needs competition to keep fees in check.”
Bipartisan Support for the Act
Although the Credit Card Competition Act was introduced to the previous Congress in 2022 without going to a vote, it has gained renewed momentum with bipartisan support.
In the Senate, three co-sponsors from both the Democratic and Republican parties have signed on.
Promoting Fairness in the Credit Card Industry
In the House, GOP Rep. Lance Gooden of Texas introduced the bill, backed by seven co-sponsors from across the political spectrum.
Senator Durbin highlighted the broad support, stating, “This is a bipartisan effort to promote fairness in the credit card industry.”
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