Credit cards play an essential role in the American economy. Credit cards serve as a valuable line of credit to millions of Americans who don’t always have the financial means to make large purchases, enabling users to make quick purchases using an alternative payment method. Credit cards are also easy to use, reduce the need to carry dangerous amounts of cash and are widely accepted by merchants and businesses. Many provide various benefits like travel rewards, cash back on purchases and state-of-the art fraud protection.
Unfortunately, these benefits are under threat due to the possible resurrection of the Credit Card Competition Act of 2022.
First introduced last July by Senate Majority Whip Richard Durbin, D-Ill., with the help of Sen. Roger Marshall, R-Kan., the CCCA claims to enhance “competition and choice in credit card network market” by mandating that card-issuing banks work with at least one alternative payment network besides Visa and Mastercard, the two current largest industry players.
In addition, the CCCA imposes a cap on swipe fees, better known as interchange fees, which merchants are charged each time a customer completes a transaction with a credit card. Banks are free to partner with as many, or as few, credit networks as they like and charge merchants fees that typically range from just 2 percent to 3 percent per purchase. While unpopular, these fees are important in helping payment networks cover the cost of processing a transaction and card-issuing banks to cover the cost of providing popular services.
Published in its entirety in Inside Sources.