Whether shopping during the holiday season, putting gas in your car or buying groceries, you don’t have to look far to see the expensive cost of living in the United States.
For some Americans, this requires an additional job. For nearly 200 million Americans, it requires a credit card. For some, it requires more than one credit card, with there being over 486 million credit cards in the United States.
The cost of living isn’t going to get cheaper anytime soon and affording it could get much harder with credit card routing legislation that Sen. Dick Durbin (D-IL) and Sen. Roger Marshall (R-KS) have introduced.
It aims to establish more competition in the credit card market by breaking up what some deem to be the monopolistic power of Visa and Mastercard. The bill would restrict credit card issuers with over $100 million in assets from processing transactions on the two networks with the largest market share, Visa and Mastercard.
It would grant major retailers such as Walmart, Target, and Home Depot the ability to process credit cards through the payment systems that are cheapest for them. This would provide mega-retailers billions of dollars while stripping banks of the necessary funds for reward programs and cybersecurity protection.
We’ve seen the havoc that similar legislation wreaked on American consumers when Sen. Durbin added an amendment to the Dodd-Frank Act in 2010. It allowed the Federal Reserve to regulate debit card interchange fees and required all debit card transactions to be processed by at least two different networks.
Studies found that most retailers didn’t adjust their prices after the legislation was implemented. Instead, many raised their prices, pocketing more than $145 billion. Interchange revenue for banks and credit unions plummeted, and free checking accounts were vanquished.
The same will happen with credit cards if the Durbin-Marshall credit card bill is passed in its current form.
By allowing retailers to process credit card transactions based on the cheapest interchange rate, banks will be stripped of the money they use to fund rewards programs.
There were $68 billion in credit card rewards across the U.S. in 2022, helping families afford the cost of daily living. The bill would eliminate the funding for many of these rewards programs, hurting the 71 percent of Americans who rely on them.
Not only would the bill strip funding for credit card rewards programs, but it would also strip funding for cybersecurity programs. Major credit card companies invest billions of dollars drawn from interchange fees into cybersecurity programs to prevent theft and fraud, one of the many reasons consumers use them.
By allowing retailers and merchants to process credit cards through non-major providers, there is no guarantee that these providers have the security programs that major networks, like Visa and Mastercard, have.
Even if you don’t own a credit card or use credit card reward programs, you should be alarmed at how this legislation could hurt an already struggling economy.
For example, take the South Carolina tourism industry. According to the South Carolina Department of Parks, Recreation, and Tourism, tourism is an estimated $29 billion industry in the state. It supports one in every ten jobs and generates $1.8 billion in state and local taxes.
A NerdWallet survey found that two in five Americans (41 percent) have a travel rewards credit card. Another study found that one in four American households rely on airline credit card rewards. By eliminating the funding for these reward programs, states whose economy benefits from tourism, such as South Carolina, would be heavily impacted.
I urge Sen. Lindsey Graham and Sen. Tim Scott to oppose the Durbin-Marshall credit card bill – and any effort to strip banks of the funding they use to provide rewards and security for everyday Americans and small business owners. Legislation that harms consumers is legislation that harms our economy.
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