US Airlines Protest Against Congressional Bill Targeting Credit Card Fees, Threatening Flyer Miles Programs
Several US airlines are pushing back against a new bill in Congress aimed at reducing credit card swipe fees, arguing that it would effectively put an end to most flyer miles programs. The Credit Card Competition Act, introduced by Senator Dick Durbin of Illinois in June, seeks to compel major US banks to allow businesses to use alternative payment networks for credit card transactions. Durbin argues that Visa and Mastercard, which control over 80% of credit card transactions in the country, have a duopoly that allows them to charge high fees of around 3% for these transactions. These fees are then usually passed on to consumers through higher prices.
Durbin believes that introducing competition by allowing other payment networks would force Visa and Mastercard to lower their fees, resulting in reduced prices for consumers. However, the airlines are concerned that cutting revenues from payment networks like Visa and Mastercard would make these platforms less willing to provide rewards programs such as flyer miles. Delta Air Lines CEO Ed Bastian expressed his worries, stating that those cards could no longer receive the funding to be able to invest in rewards-back opportunities. The airlines, through the trade association Airlines for America, have been actively lobbying against the bill.
In response to the bill, Southwest Airlines called it bad policy that would undermine or potentially eliminate credit card rewards programs. American Airlines also expressed concern that the legislation would severely restrict loyalty rewards. Meanwhile, United Airlines CEO Scott Kirby warned of the potential negative impact of the bill on rewards programs, highlighting that a significant percentage of US consumers hold rewards cards.
Losing credit card rewards programs could pose challenges for airlines beyond dissatisfied customers missing out on their free miles. Airlines generate billions of dollars by partnering with credit card companies to issue co-branded cards that offer rewards to consumers for each purchase, with the airlines receiving a payment for each use of these cards.
Supporters of the Credit Card Competition Act argue that it will not disrupt loyalty rewards programs significantly, pointing to the example of the European Union, where credit card swipe fees are limited to 0.3%. They argue that European banks and airlines still offer points and miles programs despite the lower fees. Senator Durbin stated, It’s rich that the airline industry… is pretending to have hardworking Americans’ interest at heart, accusing the industry of prioritizing their deals with Wall Street banks over consumers and local businesses.
Although Durbin previously introduced the act to Congress in 2022 without success, the re-introduced bill has gained bipartisan support, with three Senate co-sponsors from different parties, as well as a House version of the bill introduced by GOP Representative Lance Gooden of Texas.
Proponents of the bill estimate that it could save restaurants, retailers, small businesses, and customers around $15 billion annually. Durbin’s message to Visa, Mastercard, and the airlines is to embrace competition rather than fear it.
In conclusion, US airlines are voicing their opposition to the Credit Card Competition Act, fearing that lower credit card swipe fees could jeopardize their loyalty rewards programs. The bill aims to introduce competition in the credit card payment industry by allowing businesses to use payment networks other than Visa and Mastercard. Supporters argue that it will lead to lower fees and prices for consumers, but opponents, including airlines, warn of potential negative consequences for rewards programs. The bill has gained bipartisan support, and its proponents believe it could save billions of dollars for businesses and customers.
