The Credit Cards Competition Act of 2023 is pitting retailers against banks. Proponents say it’ll benefit merchants by lowering some of their operating costs, enabling them to reduce prices. Opponents say that not only are merchants likely to keep those savings to themselves, but credit card companies also may end up slashing the rewards they offer to make up for the revenue they’ll lose.
Among payment networks, Visa and Mastercard are the biggest players by far. The Credit Card Competition Act is a bipartisan bill that, according to its backers, is intended to break up what they view as a Visa-Mastercard duopoly. It would require large banks to allow more choice in terms of what payment network can be used for processing transactions that involve their credit cards.
“Swipe fees are the second-highest operating cost, on average, for these businesses. Only labor is a higher cost,” says Doug Kantor, general counsel of the National Association of Convenience Stores. “A big piece of that is that the fees automatically rise with inflation. As we see inflation in the economy, merchants’ costs go up. Convenience store owners are left chasing their tails to try to maintain some profitability with these rapidly rising fees.
Garfield anticipates that small merchants will use the savings from lower swipe fees to keep prices stable, increase their cash cushion or put toward business improvements.If you’re a committed credit card rewards optimizer sitting on a pile of points and miles, the possibility that the Credit Cards Competition Act would pass is likely making you sweat.
Still, Americans love their credit card rewards, which might mean that banks will keep rewards programs going somehow.The loss in interchange revenue could make banks and credit unions more risk-averse in their lending practices, says Jason Stverak, deputy chief advocacy officer for the Credit Union National Association. “Primarily, our major concern for credit unions is the loss of access to credit for many individuals in this country.
Source: Loan Digest (loandigest.net)
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