Sandeep1

Anyone following this closely? Does it stand a chance of passing?

moondog

From a selfish standpoint, it will be a bummer to lose out on perks that we've become accustomed to and huge SUBs. Furthermore, I don't believe that merchants will actually pass on their savings in the form of lower prices. But, I still think, at least the intent of, the bill makes sense from an overall effeciency standpoint and that merchants, especially in low margin industries, shouldn't be forced to play the lottery everytime they accept credit cards.

G2244

I have been watching this for a couple of years now. View from the Wing has done a number of write ups on the subject with some interesting points being made. Sure, it could pass and change the credit card landscape in very drastic ways. However the arguments both for and against are complicated.

For me, it would be devastating to what is both a hobby and a lucrative way to funnel my spend for valuable returns. I keep an eye on it for sure, but it also seems to come and go as a hot topic in congress.

hiker67

There will be a hearing on April 9:

US Senate chair wants airline, credit card CEOs to testify on fees
https://www.reuters.com/world/us/us-...es-2024-02-12/

tmiw

Personally, I've always gotten the feeling that merchants in the US like cards significantly less than, say, those in Europe. Most in this country only take them because unlike some other places, there really isn't a viable non-cash alternative here. (I don't consider stuff like Venmo viable since it's not much cheaper than just taking cards, not to mention that nowhere near every American uses it.) If interchange was actually closer to what EU merchants pay, for example, I imagine there'd be a lot less resistance.

That said, I'm imagining this bill working out just like debit traditionally has, where only ~50% of merchants at best will be able to route credit cards on a "cheaper" network (and regular consumers being heavily encouraged by various means to opt for the more expensive network, limiting the cost savings for merchants). In other words, I don't think this will be the thing that finally gets the so-called "highest interchange in the world" to actually go down.

Dr Jabadski

Another good point in favor of “earn and burn judiciously and SAVE” vice (the much more popular) “earn and burn”.

moondog

Even if miles become harder to obtain as a result of this, I highly doubt their value will appreciate. As such, I don't think the judicious saving strategy will become any smarter then than it is at present.

Dr Jabadski

The “value” of mile or point is based on many factors, including but not limited to ease and cost of acquisition, ease and cost of redemption, $$ cost of airline tickets and hotel rooms, cost of living and inflation, and (essentially incalculable) urgent/emergency needs.

Now that all, particularly 1st or Biz Class, airlines seats are so much more astronomically $$ expensive relatively less expensive (even accounting for devaluations) judiciously saved points or miles are “worth” much more. It’s impossible to calculate the value of enough judiciously saved points or miles to fly a family, perhaps some (elderly or infirm) in 1st or biz, across the country on short notice (e.g. for a funeral) when that same family would be challenged to afford the $$ for the same flights. Many people are much more appreciative of a 1st or Biz Class seat as they age; in my 30’s and 40’s a long haul Biz Class seat was a luxury, now in my 60’s it’s essentially a required deal breaker. Similar to $$, which everyone should be saving (for retirement among other things) despite ongoing devaluation, points and miles should be judiciously saved until an age when one has more time and ability to travel and earning opportunities (for $$ and points & miles) will undoubtedly decrease.

I maintain that the judicious saving strategy was and remains prudent and brilliant.

DeltaNeutral28

When things change though and you don't travel even 1/3 as much you find yourself in this position. Unfortunately, the CSR cashing out via grocery is about all there is to unload that I know of. There's no real reason to not capitalize on easy SUB's in the meantime so having a stockpile can happen, I hate it when they don't post speed limits (like with Ink) but nearly everyone I know is going through the Ink suite annually which is 3-4 cards plus referrals. You can have each card for 12 months too, so the velocity isn't necessarily all that high to me ( i know some people on here are doing more). I probably had UR that were sitting for 2 years getting crushed by deval's or inflation depending on how you look at points as a currency.

phltraveler

I just don't see a world in which it passes, or if it passes, makes sense.

In the retail corner, lowercreditcardfees.com makes the disingenuous argument that rewards won't be decimated by the credit card competition act because European credit cards have rewards. Of course they are way less common and way less generous. The following bullet point: "

• Visa and Mastercard argue that the CCCA would reduce credit card rewards that consumers have grown accustomed to. However, credit card rewards programs are not as beneficial as they would like you to think.

Essentially a dodge that yes, if the CCCA passes, rewards are likely to be reduced, by not answering that question and saying geez rewards aren't that beneficial. Of course, Visa, Mastercard, issuing banks, etc. are not issuing rewards out of the kindness of their hearts, they're doing it so we get their cards and use them.

Interestingly, I don't really see the bill as solving much, because let's say that the bill passes, and cards that have Visa/MC as a primary issuer would need to put on a second network. (The bill targets the top two networks by cards issued and periodic re-evaluation for applicability of which 2 are the largest) Wouldn't the logical move be to dual list with, say, Amex and Discover, with similar or higher interchange to Visa/MC?

Also, like Durbin swipe fee reform, the CCCA exempts issuers who own the network they're on, which would be a massive boon to both Discover (and Cap1 if they can clear the merger from a regulatory perspective) and Amex. If Discover became crazy expensive to process and they weren't merged with Cap1 you might see issuers refusing to take Discover again, but I don't think that's viable for a lot of businesses with Amex and corporate cards.

hiker67

"The bill's sponsors are now hoping the Credit Card Competition Act will get a standalone vote later this year."

https://www.nerdwallet.com/article/c...t-card-rewards

The bill:

https://www.congress.gov/bill/118th-...nate-bill/1838

mia

The text of the law is difficult, because it is a series of prohibitions, but as I read it, the merchant chooses the network to process the transaction, not the card issuer or the cardholder.

moondog

While I'm not confident that the bill will help merchants as much as advertised, I'd like to point out that focusing of us losing out on bonus points isn't an especially compelling argument. All of us were able to cope just fine before credit card issuers cranked up the volume on entitlements and cards issued in most other countries don't have lucrative benefits --> we will survive after the course correction.

tmiw

Assuming that the other network doesn't need to be a "signature" network, I would think the logical move would be to use a debit network instead. Cheaper in theory but since most merchants don't accept debit in the first place, it will have a lot less of an impact than e.g. actually imposing hard caps on interchange. Of course, there's the chance that some merchants that don't already accept debit will start doing so to take advantage given how much higher CC interchange has traditionally been.

Yeah, I suspect more people outside the miles/points community would side with the merchants if it were to really come down to it. Especially if it were framed as "helping small businesses" or "lowering prices" or whatever.

phltraveler

Right, but the card has to offer another network to process the transaction under. This is why big merchants often benefitted big from Durbin, at least at the outset, because on chip card transactions in particular with application priority:

1. If your point of sale defaults to priority as defined by the card - the EMV chip is going to be for the branded network (Visa, Mastercard, etc.)
2. If your point of sale prompts on multiple selection - then when a cardholder sees "Visa debit" and "US Debit", they're liable to pick Visa as the brand they recognize
3. Bigger merchants coded their terminals to route to the cheaper US Common Debit AID.

The merchant gets to pick the network they want to route to, but this is only meaningful in terms of the card offering multiple networks to begin with. Durbin CARD Act Debit reform made that meaningful by requiring at least one unaffiliated network for issuers with >$10B in assets in the original amendment (expanded to two unaffiliated networks October 3rd, 2022 by the Federal Reserve).

The CCCA of 2023 essentially seeks to do the same with credit, in that if a card is issued by one of the two largest issuers in the US, then it must offer another network that isn't the other one from the big two. The merchant in this case would control the routing, but it would be effectively pretty meaningless if they generally chose Discover/Amex as the second network from an interchange perspective vs. Visa/MC as the primary as the interchange rates would not be that different.

Whether or not we'll survive is not the argument, whether it can be made relevant in an election year to be portrayed as pro-consumer in cutting costs or anti-consumer as taking away something that was "free" (not getting into the underlying economics of interest and swipe fees there, everything is a matter of perspective) from consumers in favors of giving large corporations like Walmart and Amazon lower payment processing rates is. It's all optics. There's a reason why full serve gasoline stations being mandatory hasn't ended in New Jersey, and it's that it's hugely politically unpopular to the point where there's tons of merch saying "Jersey Girls Don't Pump Gas".

While there's a way to point at swipe fees on credit being an effective subsidy by those who pay cash/debit/check to those who pay credit, the industry has tremendous influence, and credit card rewards are very popular. Most people noticed the end of truly free checking accounts without minimum balance requirements, etc. when Durbin swipe fee reform passed. In general, whether you take a pro-bank/issuer side on Durbin reform or do a 180 and take a more retailer focused point of view, Durbin on the whole did not see consumers seeing lower prices at retail.