4 things to know about the Credit Card Competition Act

Big banks and card networks still have a problem with the truth
Sr. Director, Grassroots
September 14, 2023

Last year, we highlighted 5 lies big banks and card networks tell about swipe fees to set the record straight about the Credit Card Competition Act. As the fight for fairness in the broken and unfair U.S. payments market heats up, Wall Street is still struggling with the truth.

Fed up with fees?

Check out NRF's Fed Up With Fees headquarters to learn more about the impact of high credit card swipe fees.

Momentum is building in Congress to address this issue and pass the Credit Card Competition Act. Thousands of retailers and consumers have made their voices heard by urging Congress to act — and lawmakers are listening. The bill’s sponsors were assured this summer that the CCCA will receive a vote during this session of Congress; that vote could come as early as next week.

According to NRF’s latest consumer research:

  • 73% of consumers say they trust small businesses over large institutional banks when it comes to advocating for policies that impact consumers
  • 55% of consumers support federal legislation that allows for greater competition to lower fees that credit card companies charge small businesses for each transaction when they accept consumers’ credit cards
  • Just 21% of consumers believe that credit card companies are honest and trustworthy when they advocate before Congress on the fees they charge retailers to accept their cards

Banking giants and card networks are growing increasingly desperate in response to this momentum. They’ve signaled a willingness to spend enormous amounts of money and bend the truth to make sure they get their way. In fact, the big bank lobby has said it would “spend whatever is needed” to defeat the CCCA.

Here are some facts big banks and card networks don’t want you to know about the Credit Card Competition Act.

1. Credit card rewards will not go away.

The card industry is investing millions of dollars in media campaigns to trick consumers into thinking that the CCCA would eliminate credit card rewards. In fact, the legislation does nothing to affect rewards.

The CCCA requires that credit cards be able to be routed over at least two competing networks for processing. But it’s the card-issuing banks — not the networks that process transactions — that determine rewards. Furthermore, rewards are banks’ top marketing tool for convincing consumers to choose a Visa or Mastercard from one bank rather than another. And they are not about to give up that marketing advantage as they try to attract customers and compete for business.

In addition, the largest card-issuing banks have an average 27% profit margin; retailers survive on a 2%-3% margin and still manage to offer loyalty rewards programs to customers. That means banks would still have plenty of revenue to cover the cost of rewards after the CCCA becomes law.

The truth is that only banks can take away rewards — not the CCCA or retailers — and the rewards argument is being used as a scare tactic to confuse consumers. Banks made the same claim when credit card swipe fee reform was enacted in Europe and Australia, but consumers there still benefit from plentiful rewards.

2. Small businesses will win big with the CCCA.

The CCCA is crucial to alleviating the burdens faced by small retailers. Opponents are running ads erroneously claiming “Mega-retailers are trying to trick Congress into enacting harmful credit card routing legislation falsely claiming that it will help small businesses.”

Swipe fees are the highest operating cost after labor for most retailers, but they hit small retailers the hardest: They pay the highest swipe fee rates, don’t have huge legal teams to decipher complex contracts and have no power to negotiate. These fees prevent small merchants from investing in their businesses by hiring more staff, buying more inventory and competing on price.

Swipe fees are high because Visa and Mastercard control over 80% of all credit card volume. They centrally price fix the swipe fees charged by all banks that issue cards under their brands and block competing networks that could offer lower fees and better security from processing transactions made on their cards.

3. Low-income families are impacted the most by swipe fees and would benefit the most from reform.

In another false ad, opponents claim the CCCA would harm vulnerable communities, saying “low-income families and communities of color will be the first ones kicked out of the credit card system.” This claim is particularly egregious as there is absolutely no language in the CCCA that would ban anyone from the credit card system. Moreover, it’s highly unlikely that banks with 25% profit margins will decide they don’t want customers just because they might receive less money from merchants in swipe fees.

In fact, studies have shown that the current system is harmful to low-income families. The Hispanic Leadership Fund found that households making less than $75,000 per year collectively transfer over $3.5 billion a year to wealthier households that benefit from credit card rewards because swipe fees drive up prices for all consumers regardless of whether they use a credit card. The Hispanic Leadership Fund says the CCAA would benefit low-income families.

4. Consumers want swipe fee reform.

Take action

Contact Congress today and tell lawmakers to co-sponsor the Credit Card Competition Act.

CCCA opponents continuously suggest the CCCA would be detrimental to consumers. The truth is American families and small businesses are paying the price for excessive swipe fees. Swipe fees cost the average American family over $1,000 annually, whether it’s in the form of higher prices or credit card surcharges. The pro-consumer U.S. Public Interest Research Group is one of the leading supporters of the CCCA.

Consumers are increasingly aware of swipe fees and their impact on prices. They recognize that the flawed payments market has allowed these fees to more than double over the past decade. According to a recent poll by NRF, 81% of consumers support federal legislation that would allow for greater competition to lower credit card fees for small businesses.

Join NRF in helping advance the Credit Card Competition Act by participating in our grassroots campaign.

Related content

Telling the retail story at the state and local level
Executives at the California State Retail Meeting
Retail Gets Real episode 317: Live from the Council of State Retail Associations meeting.
Read more
NRF Survey Shows 21% of Consumers Trust Credit Card Companies
default image
Less than 21% of consumers believe credit card companies are trustworthy when they advocate before Congress.
Read more
Advocating for retail: Top priorities for the fall
Capitol Hill
Retail Gets Real episode 316: NRF Senior Vice President David French on important legislation pending in Congress.
Read more