US Airlines Speak Out Against Credit Card Competition Act

Airlines in the United States are raising concerns about the Credit Card Competition Act of 2023, a bill proposed in June that aims to lower credit card transaction fees. The airlines argue that if the bill becomes law, it will result in a significant reduction or even the end of flyer miles and rewards programs.

The Purpose of the Credit Card Competition Act

The Credit Card Competition Act was introduced by Senator Dick Durbin of Illinois and seeks to increase competition in the credit card market by allowing businesses to use payment networks other than Visa and Mastercard. Durbin claims that the two payment giants control over 80% of credit card transactions in the US and charge high transaction fees, which ultimately affect the prices paid by consumers.

Airlines’ Concerns

US airlines argue that lowering revenues for payment networks like Visa and Mastercard will make these companies less willing to offer rewards programs such as flyer miles. They claim that these programs rely on funding from the payment networks themselves and without that funding, they will not be able to invest in offering rewards.

Delta Air Lines CEO Ed Bastian stated that cutting revenues from payment networks would have a significant impact on rewards-back opportunities, while Southwest Airlines says the bill undermines or could even end credit card rewards programs.

The Impact on Loyalty Rewards

Not only would the potential loss of credit card rewards be frustrating for customers, but it would also pose financial challenges to airlines. Airlines generate significant revenue by partnering with credit card companies to issue co-branded cards that offer rewards for spending, ultimately providing financial compensation to the airlines themselves.

S. Durbin’s Response

Supporters of the Credit Card Competition Act argue that the bill will not disrupt loyalty rewards programs as claimed by the airlines, citing the example of the European Union’s limit on credit card swipe fees. Senator Durbin argues that the airline industry’s opposition is hypocritical, as it benefits greatly from co-branded credit cards.

Durbin initially introduced the act in 2022 but it did not proceed to a vote. Since its reintroduction in June, the bill has gained bipartisan support and proponents argue that it will save consumers and small businesses billions of dollars annually.

Senator Durbin urges payment giants and airline companies not to fear competition, stating that the bill will ultimately benefit consumers and help level the playing field in the credit card market.

Source: Major US airlines are on the warpath with Congress over a bill they say would gut flyer miles