Merchants agree with Durbin that banks and airlines are chipping away at credit card rewards – Decatur Tribune

WASHINGTON, May 10, 2024 – The Merchant Payments Alliance today agreed with Senator Richard Durbin that the airline industry’s practices are the biggest threat to credit card rewards and that more competition will help consumers earn more Great benefits and savings.

“It is their own questionable practices that threaten American consumers' ability to redeem rewards,” Durbin said of banks and airlines. “Modern airlines have become credit card companies that also happen to own airplanes.”

Durbin spoke on the Senate floor Thursday afternoon after the Consumer Financial Protection Bureau released a new report saying airlines and banks often devalue or deny incentives even after meeting requirements. The report was released at a joint CFPB-DOT hearing Thursday morning after Durbin asked them to investigate reports of unfair and deceptive practices in airline frequent flyer and loyalty programs.

Earlier this year, Durbin invited American Airlines CEO Scott Kirby and the CEOs of United Airlines, Visa and Mastercard to testify at a hearing on rising credit card swipe fees, but they all declined to appear.

Durbin said Thursday that airlines will urge consumers to sign up for credit cards “as soon as they get passengers to buckle up,” citing studies that show they make more money using co-branded cards than flying passengers. He said other reports show they often devalue awards and that rewards purchased from airline websites can be worth three times the value at the time of redemption, making them “winged extortion.”

“Senator Durbin is right: Banks and airlines are taking away people's rewards by devaluing them and making them harder to use,” said Doug Kantor, a member of the Monetary Policy Committee's executive committee and general counsel of the National Association of Convenience Stores. )express. “Consumers would be better off if more competitors pushed them to do the right thing. Just 10 banks account for over 80% of the Visa and Mastercard credit card market, and they all charge the same centralized fixed fees Price. Competition allows businesses to serve customers honestly, and the lack of competition is at the heart of the problem Senator Durbin identified.

The Credit Card Competition Act will bring needed market power to the credit card industry and aims to reduce credit card swipe fees, which average 2.26% of transactions but can be as high as 4%. Credit and debit card swipe fees have more than doubled over the past decade and will reach a record $172 billion by 2023. Up $1,102.

Fees have risen due to lack of competition: Visa and Mastercard – which control more than 80% of the market – each centrally set swipe fees charged by banks that issue cards under their brand, rather than letting banks compete to offer the lowest rates . They also prevent transactions from being processed through competing networks that offer lower rates and better security.

CCCA will ensure that credit cards issued by the largest U.S. banks can be routed through at least one competing network, such as NYCE, Star, Shazam or Discover, in addition to the Visa or Mastercard networks. Banks will choose which networks to enable, and merchants choose which to use, leading to competition on fees, security and service, saving merchants and their customers an estimated $16.4 billion annually.

Financial institutions with less than $100 billion in assets, including all community banks and all but one credit union, will be exempt, credit card rewards will not be affected, and there will be no changes in how the credit cards are used.

A study last year by payments consultancy CMSPI found that under the CCCA, rewards would “at best” be reduced by less than a tenth, or 1%, and that banks would have “enough profit” to offset the loss of swipe fee revenue and “maintain the current tiers of rewards. A report by fact-checking site Verify Brands claims rewards would be revoked under the bill because they are “false.”

About MPC
this Merchant Payment Alliance Representing retailers, supermarkets, convenience stores, gas stations, online merchants and others in the fight for a card system that is more competitive, transparent and fair to consumers and merchants. Follow MPC Twitter, Facebook or LinkedIn Learn about the latest swipe fees.

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