We reported on a piece of legislation that could affect the credit card industry. The Credit Card Competition Act appeared to be dead in the water. There were no hearings scheduled despite being referred to the Senate Committee.

That is no longer the case.

The bill has been co-sponsored by Sen. Dick Durbin, D-Ill., and Sen. Roger Marshall, R-Kansas. Since it is attached to a defense spending bill, it is poised to go through congress.

The Dodd-Frank financial reform package was passed in 2010 after a similar tactic was used by the senator. There is fear that an approach like that would have the same effect on the credit card industry.

The senators are trying to push the bill through.

There are renewed efforts that could change the credit cards in your wallet.

Overview of the proposed legislation


The transaction is routed over a payment network when you use a credit card. In exchange for securely processing said purchase, the merchant is charged an interchange fee, usually calculated based on a percentage of the total purchase price, though the exact amount can vary depending on the card and other factors.

Part of the fee goes to the payment network and the other part goes to the issuer of your card to cover its lending costs.

There is a difference between a credit card network and an issuer.

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The Credit Card Competition Act is intended to inject more competition into the industry by forcing banks to work with at least one alternative payment network besides Visa and Mastercard.

The regulation would allow cheaper alternatives to compete with the established players. Merchants might choose a payment network with the lowest cost in order to pass those savings on to their customers.

History shows that this probably wouldn't happen.

Consumers got the short end of the stick in the years after Dodd-Frank was passed.

  • A 2015 economic survey from the Federal Reserve Bank of Richmond found that just 1.2% of merchants lowered their prices as a result of the Durbin Amendment — while more than 1 in 5 actually raised them.
  • An article from George Mason University estimated that the amendment transfers “$1 billion to $3 billion annually from low-income households to large retailers and their shareholders.”
  • A study from the University of Pennsylvania noted that average monthly checking account fees increased by over 70% as a result of the Durbin Amendment.

There are consequences of imposing similar regulations on credit cards.

Where this bill stands today

The credit card competition act has been added to a spending bill that will be discussed next week. Congress has oversight of the defense budget through the National Defense Authorization Act. Credit card interchange fees are linked to higher prices at military stores in a press release.

The veterans are being charged more for their purchases.

Marshall said that it's important to make sure those who served and are serving are not being taken advantage of.

Some people don't see the connection.

Do veterans face greater harm from swipe fees?

Whether you are a member of the armed services or not, merchant interchange fees are included in all credit card transactions in the U.S. The senators want to draw a connection between veterans and the money they spend at military stores.

Many don't think it's true.

Jeff Tassey, board chairman of the Electronic Payments Coalition, stated that the legislation has nothing to do with defense spending. The senators should stop trying to use America's veterans to get a government handout for big-box retailers.

Rob Nichols, president and CEO of the American Bankers Association, said that a proposed government mandate that will rob military families of their credit card rewards and undermine their data security has no business being added to annual legislation that bolsters our national defense.

The bill was introduced and referred to the committee, but it was not expected to pass. As an amendment to a larger spending bill, the chances of it becoming law have increased.

Tassey said that the Walmart-Target sponsored Credit Card Competition Act can't stand on its own merits. Congressional lawmakers should reject the use of our nation's veterans as pawns.

The Senate will consider the bill in October, but a full vote on the bill is not likely until after the elections.

What you can do

We received a lot of questions when we last covered this topic. If you are worried about the impact this bill will have on your credit cards, you can write to your representatives.

The full details can be found on congress.gov. The site will pull up your district's elected representative and your state's two senators. You should be able to contact them directly with your concerns about the amendment to theNDAA.

Bottom line

The Credit Card Competition Act of 2022, an amendment to a broader defense spending bill, will be considered by the US Senate next week. Big-box retailers would be the biggest beneficiaries of the rule since it is supposed to cut interchange fees for merchants.

Credit card rewards could be in danger.

Please see our comprehensive story from Sept. 16 for more details.