Consumer Investigation: Is Congress considering a bill that would eliminate credit card reward programs? We investigate
ROCHESTER, N.Y. – Commercials have been running during Buffalo Bills games that worries a lot of consumers. We know because you’ve reached out to us. One of the ads, funded by the American Bankers Association, claims that congress is considering a bill that would eliminate credit card rewards programs. It says in part, “Why are some in Washington pushing a new costly mandate that will make things harder for consumers? It will mean that the credit card rewards you enjoy will go away.”
Not surprisingly, the ad has gotten consumers’ attention. According to Lending Tree, 87 percent of credit card holders participate in at least one rewards program. That means a whole lot of folks are paying for flights, hotel stays, even all their Christmas gifts with points and cash back. The hotly debated bill is called The Credit Card Competition Act. While opponents say the bill will result in the elimination of popular plastic perks, the National Federation of Independent Business (NFIB) argues the bill will actually help consumers. It has released a video in which small business owners espouse what they believe are the benefits of the bill.
“I think one thing that people forget about all these costs and fees that businesses pay, it’s the consumers that end up paying these fees,” said David Herich, a small business owner in Minnesota and member of NFIB.
The fees he’s referring to are called transaction fees or swipe fees. Every time you use a credit card, the bank charges the retailer a fee to process the transaction. For example if you spend a $100 using a credit card, the bank charges the merchant $2 to $4 to process your payment, which is generally passed on to the consumer in the form of higher prices.
“In the United States alone, merchants pay 77 percent higher processing rates than in Europe and Canada,” said Neil Abramson, a small business owner in Massachusetts and member of NFIB.
He points the finger at Visa and Mastercard which process most of the credit card transactions in America. The bill would mandate that big banks allow at least two companies to process your payment, introducing competition which would theoretically drive down swipe fees.
But banks say those fees pay for your credit card reward programs, so this bill would eliminate your perks. And in a letter to Congress, banks argue that a similar bill passed more than a decade ago that reduced debit card fees, not only eliminated perks, but also did not reduce prices for consumers.
I recently asked Congressman Joe Morelle about the bill, and he’s still on the fence.
“One of the concerns we have is that some of the companies that are proposing to do these types of activities have not engaged in appropriate cyber hygiene, and we do not want to expose credit card consumers to any more cyber-attacks or efforts to get at their data,” said Morelle.
The bill was introduced last year and went nowhere. But it’s now a planned amendment to the senate’s government funding bill. There are big bucks at stake, so all are watching it closely, as am I. I’ll keep you posted.