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August 1, 2023 : A bipartisan push in Washington is sparking a conflict between retailers and payment processors over credit card fees. The reintroduced Credit Card Competition Act aims to promote competition by requiring big banks to offer at least one network other than Visa or Mastercard for card transactions. Retailers like Amazon, Best Buy, Target, and Walmart support the bill, claiming credit card fees raise business costs and affect consumer prices. However, major processors like Visa and Mastercard argue the bill could hurt consumers by reducing credit card rewards programs and fraud protection.
Bipartisan support for the bill has grown, but no voting schedule has been set yet. The legislation could become an amendment attached to other accounts.
Visa and Mastercard dominate 80% of credit card volume, leading proponents to argue that the bill would enhance competition and reduce swipe fees, which reached $160.7 billion in 2022. However, opponents fear that the legislation might mislead consumers and lead to transactions being routed through cheaper networks with limited rewards and fraud protection.
In the past, the Durbin amendment was introduced to lower costs for consumers and merchants but had limited impact. While some experts warn of potential adverse effects on credit card rewards, research from CMSPI suggests tips are likely to stay the same based on current margins.
Meanwhile, businesses like Tandym are exploring technology to reduce interchange fees, offering an alternative network and supporting merchants’ loyalty programs. As retailers and payment processors lobby for their interests, the future of the Credit Card Competition Act remains to be determined.
