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The Credit Card Competition Act of 2022, Explained

Lower swipe fees for businesses could mean fewer credit card rewards for you.

bgton / Getty Images

For every transaction you make with your credit card, the merchant pays an interchange or “swipe” fee. And those fees can add up. 

Over the years, businesses have paid this steadily rising, nonnegotiable charge to major credit card networks, which ranges between 1% to 3% of every transaction. Consumers may never see these swipe fees on their receipts, but that doesn’t mean part of the cost isn’t passed down to them. Some merchants may raise the prices of their goods or services to help offset these swipe fees. The Credit Card Competition Act, however, proposes changes to how this system currently operates.

The bipartisan bill sets out to bring more competition among credit card networks by allowing new startup card networks to offer payment processing at potentially lower rates. While this could lower swipe fees -- providing some savings that could get passed on to consumers -- there’s fear it may also open the door to security and fraud concerns and may even disrupt credit card rewards programs.

Here’s the latest on this bill, how likely it is to pass and what it could mean for credit cards and rewards. 

What are credit card swipe fees?

For every transaction you make with your credit or debit card, the retailer must pay a fee to the specific credit card network that processes the payment -- American Express, Discover, Mastercard or Visa. The charge is 1% to 3% to process each consumer charge securely. For example, if a restaurant accepts Visa and Mastercard cards, they’ll pay fees to both networks.

These interchange fees have remained pretty consistent over the years, said Ted Rossman, a senior industry analyst for Bankrate.com, CNET’s sister site. But. since inflation skyrocketed in 2022, these fees began increasing, said Rossman.

In 2021, merchants paid a combined $105.3 billion in swipe fees, which is 25.1% higher than what they paid in 2020, according to the 2022 Nilson Report. Currently, there aren’t other network options with lower fees. 

What is the Credit Card Competition Act of 2022?

Sponsored by Sen. Richard Dublin, a Democrat of Illinois, and Sen. Roger Marshall, a Republican of Kansas, the Credit Card Competition Act calls for banks to offer more credit card networks for transactions. 

If passed into law, the Federal Reserve will require credit card issuers and banks with over $100 billion in assets to offer at least two credit card network choices, according to the bill summary. Banks would have to choose at least one of the smaller, new networks to go along with a larger network. From there, the merchant can choose which of the available networks to process payments, Rossman said. 

“The idea is that opening up more competition would lower fees,” said Rossman. There’s also the thought that this act will open the door for smaller competitors that currently operate debit (but not credit) networks -- like the New York Currency Exchange, Star and Shazam, he said. The new networks will operate alongside other networks under their own payment guidelines, separate from existing ones. 

What the CCC Act means for businesses

Passing the CCC Act means a decrease in swipe fees across the credit card industry, the biggest benefit for businesses. Both large and small companies will be able to save money on processing fees because of the flexibility to choose a network with lower fees to help cut costs. 

“I do believe that this act could help me save money,” says Trinity Owen, founder of The Pay at Home Parent, a small business that offers courses to help parents boost their skills. “By reducing these fees, I would have more money to reinvest in my business -- whether that’s by hiring more staff, upgrading equipment or expanding my product offerings.”

Owen hopes if the CCC is passed, it will “encourage credit card companies to be more transparent about their fees and to compete more aggressively for small business customers.”

What the CCC Act means for consumers

On one side, the hope is that lower fees will mean lower prices for consumers, but that’s not guaranteed -- especially if inflation pushes the price of goods and services higher. But there are two primary concerns with passing the CCC Act -- first, regarding security, and second, regarding credit card rewards.

Small networks may pose security concerns

Consumers who oppose the bill are worried that there will be a trade-off if a merchant opts for a cheaper credit card network. While the fees may go down, which could potentially translate to savings on the consumer side, new networks may have fewer fraud protection measures. 

“Card networks would have fewer incentives to invest in security, since better security would probably be more expensive and merchants might not pick that network,” said Rossman.

A smaller credit card network may not have the technology or insight to protect consumer data in large quantities, as major credit card networks have done for decades. This could make consumers’ credit card information more susceptible to data and other security breaches.  

“I do think that it’s important for small business owners to be vigilant about their credit card transactions,” Owens said. That includes protecting customer data, using secure payment systems and keeping an eye on credit card transactions for fraud attempts. 

Credit card rewards could diminish… or vanish entirely

The CCC Act could also shake up credit card rewards as we know them. With banks earning less from interchange fees, card issuers may have fewer funds to put toward cardholder rewards and benefits. It could also mean every existing credit card agreement will need to be rewritten, said Rossman. 

If the swipe fees are reduced, some credit card issuers may not be able to offer the same level of rewards -- and some could disappear altogether. Card issues might recoup some fees by charging a higher annual fee or simply offering fewer credit card rewards.

Those against the CCC Act point to Durbin’s amendment, which caused most debit card rewards to disappear after debit card interchange fees dropped. This left very little incentive for banks to offer rewards for debit cards. If the CCC Act is passed, many worry it will impact credit cards in the same way.  

Where the bill currently stands

The CCC Act was originally tied to the National Defense Authorization Act, which would impact credit card fees at military bases, according to The Points Guy, CNET’s sister site. The bill did not pass in 2022 and the future of the CCC Act remains a question.

The bottom line

Right now, merchants pay set swipe fees every time you use your credit card at checkout. The Credit Card Competition Act of 2022 proposes opening up payment processing networks to more competitors to potentially lower processing fees, which have continued to rise along with inflation. This charge is then passed on to consumers who, unknowingly, pay a portion of the charge through price increases. The CCC Act has not yet been passed into law, and the bill could still be revised or reintroduced in the future.

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Dashia writes for CNET. In the past, she wrote for several industries, including FinTech, home security, automation, and more. She loves baking bundt cakes and her favorite flavor is white chocolate raspberry.