I think @Isochronous meant the CC users that live beyond their means and pay interest / late fees which equal the profits that banks make by issuing the card.

I'm guessing that is what he intended (i.e. that people who can't manage their finances support those who do), but that's not what's really going on here; outsized (v other countries) interchange fees/revenues are what make $1000 SUBs pencil economically for US issuers.

Maybe large merchants can access that. But small merchants (like myself) have ZERO bargaining power on these charges. I assure you I am not getting .5% rate on debit cards. I only process about 125k a year in direct credit card transactions and about 500k a year in indirect (my product sold through large online platforms). I pay 3% transaction fee across the board. IF I was processing in person (card in hand, face to face), I could get it to 2.3% at best.

That brings up another point--assuming interchange is in fact forced down somehow, it's very possible the processors won't pass much (if any) of the savings onto their merchants. Though at least at the processor level, there is possibly enough competition to mitigate that (assuming merchants can get out of existing agreements relatively easily of course).

Isn't passing through the savings to merchants pretty much the entire point?

Of course, but considering the system we live under, I fully expect that any results from this won't be as good as anyone would like. I'd love to be proven wrong, though, even if that does mean vastly diminished CC rewards.

Here's an op-ed from someone claiming that the Credit Card Competition Act will reduce card security by reducing the amount of money that Visa, MC, etc. have to combat fraud. Not only does the author assume that interchange paid by merchants will decrease (it very well might not, especially for a lot of smaller businesses), card security is arguably better in places with low interchange fees (like the EU) thanks to legally mandated 2FA for online purchases and PIN authentication for larger in-person ones.

Really, as I've said before, a legally mandated cap would be better than this bill (assuming this is actually a problem that should be solved, of course).

It's not just about rewards. It's about perks that protect consumers: car rental insurance, extended warranty, purchase protection, luggage delay, hotel burglary, price protection, etc.

Many of those could theoretically be paid for via annual fees instead of interchange. Of course, it's more likely that many of those would go away entirely, especially on lower-end cards.

i thought you couldnt accept payment with a visa card without going through the visa network?

wsj.com/opinion/dick-durbin-credit-card-bill-visa-mastercard-discover-rewards-programs-89f92b12
durbin.senate.gov/newsroom/press-releases/durbin-marshall-welch-vance-introduce-bipartisan-credit-card-competition-act
if capital one is allowed to acquire discover, not sure if durbin will drop it, or if the virginia politicians will pick it up

I don’t see any benefit to the government getting involved in this - in fact it almost certainly would be worse. Just compliance with any new regulations will come at a cost likely offsetting any fee the free market sets.

While we can lament the 3% fees as having an impact on prices, what about the cost/risk of securely transporting large volumes of cash? I’m happy to not have to walk around with thousands in cash to buy a refrigerator, and the vendor gets the funds securely in an account without the same risk of theft. Even going to a farmers market it is easy and convenient and less labor intensive for a vendor to sign up and use Square with a simple device and a cell phone. I’m sure that increases sales.

Of course we are happy to collect the points or cash back - in fact I recommend that everyone should as long as they understand how the credit card works and don’t fall into the trap of high interest debt.

Companies like Walmart don't pay 3% interchange fees; independent retailers often do. These numbers have significant impact in low margin industries (e.g grocery).

I agree that this is something that the government could screw up, but it doesn't seem that complicated to me.

Totally agreed with this

And yet, so many other countries manage to regulate these fees without major negative issues.