Experts concerned over who will cash in with the ‘Credit Card Competition Act’

Swipe fees add up to more than $77 billion dollars in revenues for Visa and Mastercard
Experts concerned over who will cash in with the ‘Credit Card Competition Act’
Experts concerned over who will cash in with the ‘Credit Card Competition Act’(DC Bureau)
Published: Oct. 5, 2022 at 1:46 PM CDT
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WASHINGTON (Gray DC) - 70 percent of Americans hold at least one credit card. It’s a financial tool which makes many transactions easy, but also comes with a cost. Every time you swipe or tap your card - there’s a fee. Two senators are now trying to diversity who collects it.

Senator Roger Marshall along with Dick Durbin are introducing a bill that aims to create more competition in the credit card sphere.

“I think that competition is the backbone of capitalism,” said Marshall. “It works in every other industry. Why would it work in this particular one?”

The Credit Card Competition Act would mandate that larger banks would have to provide at least two card networks for every credit card transaction. The idea is that there will be more choice in the market of who collects swipe fees.

“I think that this bill absolutely will help consumers I think whenever you introduce competition into a market, it’s going to benefit consumers,” said Marshall.

For Ted Rossman, a financial expert at Bankrate, this could be a solution looking for a problem.

“I think large merchants would benefit,” said Rossman. “I think card companies would certainly lose. And unfortunately, I think consumers would lose as well.”

Major retailers sent a letter to congress urging the bill’s passing. According to the letter, retailers say the bill would create 11 billion dollars in savings for merchants. But as rossman explains - there’s no guarantee any of those savings will be passed on to the consumer.

“I think the merchants are just going to keep the difference,” said Rossman. “They’re not going to lower prices. They say they would. But with the durbin amendment, the federal reserve found that only 1% of merchants lowered prices”

Rossman also explains that with banks losing money - they’ll find a way to make it up elsewhere.

“These fees can be kind of like whac-a-mole. If things get taken away in one area, banks are going to raise them somewhere else. So that may hurt us with other fees. They may be less likely to issue credit cards, especially for people that may not spend as much or may have lower credit scores or lower incomes. I think that there would be some unintended consequences,” said Rossman.l

Another one of those unintended consequences could be security. By opening up the market the new vendors, there’s room for error.

51 bankers associations also sent a letter to congress, saying the bill would quote, “hand control of our nations credit card systems to breach-prone merchants.”