Credit Card bill before US Congress killing FF programs?
 

Not sure if this has been covered somewhere else on FT (if so, mods pls move):

https://www.morningstar.com/news/mar...are-up-in-arms
United Airlines (UAL) CEO Scott Kirby said on the airline's Oct. 18 earnings call that the proposed legislation "would kill rewards programs."

In an interview with Bloomberg, Delta (DAL) CEO Ed Bastian said the bill would result in "unbelievable" consumer backlash.

Campaign launched by airline trade group:

https://www.airlines.org/protect-our-points/

This is a recurring topic, see this thread from 2013: https://www.flyertalk.com/forum/cred...n-rewards.html

While it might have been, the airlines are taking a really strong stand on it this time around.

At this point, I'd be willing to support the bill in exchange for one consumer-friendly add-on: outlaw credit card surcharges / minimums everywhere in the U.S.

Banks are still going to compete. Airlines are still going to compete. They still want us using their products, because they're still making money on the interest and airlines are still making money from "loyal" customers. Maybe the SUBs aren't as huge and maybe the cards aren't THE central pillar in every FF program anymore, but I remember back when the FF programs were more about, y'know, *actually flying* than credit cards. And they seemed to function well enough then.

As much as I love miles/points, it seems too grossly self-serving to write my Congressman to say "keep this duopoly intact to keep my prices higher so that I can get points/miles on the back end." I get the banks' logic and the airlines' logic, but I totally realize that the 99% of the people in this world who aren't points/miles nerds should *not* want this.

Does anyone really think merchants will lower their prices, or even stop increasing them at the current rate of increase, if we lose all our points, miles, cash back, etc from the airline and other cards? I don't think so either. So I fully understand why the airlines are lobbying against it....without the "loyalty" generated by those cards, they will have to resort to some other means on keeping customers.

AFAIK, this brings the US in line with roughly the same EU regulations and loyalty program still work there.

Maybe they aren't as generous as USA CC programs which means US Airlines will have to compete on price and service in the AIRLINE industry instead of features in the banking industry

Shocker huh?

My understanding is that this addresses swipe fees and processing. A 3% fee charged to merchants is tough on small businesses. Airline and credit card issuers are opposed as it would cut into their margin which allows them to offer rewards as a form of kickback. As mentioned above, this is similar to EU regulations and rewards still work there.

I don't think we'd instantly get 3% lower prices....but over time, some portion would flow back to consumers because of competition. It's like when a corporate tax incentive is introduced: the portion that goes to higher profits and the portion that goes to lower prices is dependent on the competitiveness of the market in question. It usually lands somewhere in the middle.

I realize that all of us reading this stand to benefit more from the status quo. We're the crowd that maximizes the points. But for the economy as a whole, weakening the duopoly is probably better.

Agreed, but capping interchange fees does not directly do that. If MasterCard and VISA were broken up into several smaller entities, price competition should ensue without an artificial cap.

It's lately been covered several times by The Points Guy website. Here is their latest post about it from about a month ago:

https://thepointsguy.com/news/update...ompetition-act

Here is the congressional website with a link to the actual bill itself, the Credit Card Competition Act of 2023, S.1838, 118th Congress (2023-2024).

https://www.congress.gov/bill/118th-.../1838?s=1&r=75

Text of bill:

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

As [MENTION=13066]pinniped[/MENTION] said, card charges to merchants (e.g. "3%," and some pay 4-5%) are hard on small merchants (especially) for whom all or a large majority of sales are by credit card. Look at it this way: that's 3% right of the top of revenue. If the business is running on a 10% profit margin -- that is to say competitive position in which the business operates -- that 3% is 23% of the gross profit (i.e. 13%) before the credit card fees are paid.

If the business is comfortable operating at a 10% profit margin, per its competitive environment, where would that 3% go if it weren't charged to the merchant? It could be to lower prices, for a competitive advantage. Or it could be to paying employees a living wage, or hiring more employees. Or a combination of those three things, and whatever the choice those all are things that (across all businesses) make life better for everyone in our society.

Maybe you see where I'm going with this. The Credit Card Competition Act is a compromise that partly solves the credit card dilemma. Really, the legislation that's needed would require all fees and other costs of using a credit card to be charged to the card holder on the monthly bill, and prohibit putting those charges on the merchant. The merchant would then pay only for hardware and software for registering sales.

Airline loyalty programs would still exist, but would be more like they were originally. Miles would accrue from butts in seats or spend on air fares. Seems fair to me, all the way around.

Welcome to Flyertalk.

Where is the analysis to support this claim? Merchants benefit from accepting payment by card, and they should pay for the service. I do understand that merchants would prefer to pay less, but to suggest that they should pay nothing needs further explanation.

Merchants benefit from making a sale, whether it is paid by cash, check or card. Merchants should pay for whatever their banks charge for card processing hardware/software and for administering the merchant's account. The card holder should pay for the convenience of making a purchase with the card, including the swipe fee and charges for "rewards" or whatever else, etc. As it is, the Federal Reserve Bank has estimated that in the U.S. overall, charges to merchants for card use inflate prices to everyone by 2.24%. That's up from an estimate of 1.7% in a study the Fed did in 2018.

You could consider that to be a tax -- and it is taxation without representation that can and should be eliminated just by requiring that the card holder be billed for all of the fees and other charges that arise when a card is used. Durbin's bill doesn't go far enough.

The problem is that US airlines lean very heavily on those credit card miles in order to operate in the black every year. Back in the ‘old days’ or frequent flyer programs, we had a lot more airline bankruptcies.