Airlines Take Stand Against Proposed Credit Card Bill
Joe Cortez October 31, 2023
The industry is coming together to oppose a U.S. Senate bill aimed at breaking up the hold Mastercard and Visa have over the credit card processing industry.
Airline Industry Claims Bill Would End Credit Card Rewards
Introduced in the Summer of 2023 by Senators Dick Durbin (D-IL), Roger Marshall, M.D. (R-KS), Peter Welch (D-VT), and J.D. Vance (R-OH), the Credit Card Competition Act would direct major credit card issuing banks to offer a choice of at least two networks to process credit card transactions. Proponents of the bill say it would spur competition and lower transaction fees for retailers, the aviation industry says it would create much bigger problems.
Chief executives in the aviation space and consortium Airlines for America are leading a campaign against the bill, claiming that it would ultimately hurt both the loyalty industry and those who use any rewards-earning credit cards. According to data released by Airlines for America, 63% of all points and miles issued in 2022 were earned from a credit card, leading to 15 million discounted domestic trips that year.
“This will kill rewards program[s], it would not exist anymore,” United Airlines CEO Scott Kirby said during his third quarter results call, as quoted by a Seeking Alpha transcript. “[The bill] will kill debit card rewards programs when it happens. And I think it’s a bad policy.”
In an interview with Bloomberg, Delta Air Lines chief executive Ed Bastian noted that if banks were to offer multiple processing options, he is concerned “Those cards could no longer receive the funding to be able to invest in rewards-back opportunities.”
The aviation industry claims that credit cards themselves – or the processing networks behind them – are not to blame. Instead, they put the pressure on banks and processing terminal companies who are the ones charging the outlandish fees for retailers.
“There’s middleman in between credit card companies, the banks and the small businesses,” said Kirby. “And I think that’s probably where the bulk of the issues are. Some of those middlemen charge square charges as little as 35 basis points, and some of those middlemen are charging businesses 300 or 400 basis points.”
An analysis for Airlines for America estimates eliminating single-network cards would “…eliminate consumer choice over which network credit transactions are routed, increasing complexity and confusion.”
While the bill has not been passed into law, both sides are actively campaigning. In September 2023, Durbin and others were pushing the Senate Judiciary Committee to move the bill forward towards a full vote in the upper chamber. The bill is still in the review phase, waiting for a committee recommendation.
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There may be some underhanded lobbying going on. Both my state's senators sent me emails within 5 minutes of each other today confirming that they had received my submissions opposing the legislation. I did not send anything to either politician. As a top tier flyer for more than 40 decades, however, I would welcome getting airlines out of the credit card business.
Back in 2010, the Dodd Frank Act, lowered debit card swipe fees. It was all raved that this would save consumers money. Not one penny of the lower swipe fees went to consumers. The merchants and banks took all the savings for themselves. By the summer of 2011, debit cards that earned any kind of rewards, DISAPPEARED!
The exact same thing will happen with these "savings" by lowering credit card merchant fees. You will see none of the savings as consumers. Plus the security issues from having multiple payment processors will be a nightmare. Just wait and see! Because if this passes into law, credit cards that offer rewards or cash back will diappear!
Merchants are also being disingenous because hardly any of them pay 3% merchant fees. The average is 1.5%. So when a merchant charges you 3% extra to use a credit card, they are just taking extra profits from you!
This is a poorly written article that doesn't even get to the meat and bones of what is really going on. As I reconciled credit card merchants account for our family businesses as a kid and checked the 'merchant fees' as well as who they went to, I'm not sure what this bill is even supposed to do, moreless how it is related to airline or any other credit card perk.
Airlines are being disingenuous. They are the ones who would really be hurt by this. It would put them completely out of business unless they figure out how to run as airlines once more instead of credit card factories. I wouldn't mind seeing it happen, because airline loyalty programs as they stand today are a complete house of cards with airlines wanting to drink as much from the revenue fire hose as they can, then continuously tightening the screws on the redemption side when they don't want to fulfill their obligations from printing all that scrip.
Thank you for this eloquent statement of the airlines ss credit card factories. First they get billions of dollars from the credit card companies then they slash the value of those miles including those earned by actual travel. The most moderate term that comes to mind is fraud. Many much harsher descriptions come to mind.
The important thjing to remember is that this affects me negatively. I rest my case.