Airline rewards programs are now at risk of being wiped out because of a new bill aiming to lower credit card transaction fees.
Because of this, many flight agencies, such as Southwest Airlines and United Airlines, criticize this legislation, saying it's a bad policy. If you are a regular passenger and rely on airline rewards programs, here's what you need to know about the proposed Credit Card Competition Act (CCCA).
Airline Rewards Could End Because of CCCA
According to Business Insider's latest report, Sen. Dick Durbin of Illinois proposed the Credit Card Competition Act in June. If this bill becomes a law, it will require big banks in the US to allow businesses to choose another payment network.
This means that airlines and other travel companies will be able to have at least one payment network that isn't Mastercard or Visa in credit card transactions.
Durbin argued that CCCA is needed because Mastercard and Visa hold a "duopoly" over card payments in the United States. He claimed that these two American banks control over 80% of credit card transactions.
The senator said that his proposed legislation was created to lower the 3% swipe fees that Visa and Mastercard charge to airlines and other businesses, which are usually passed on to consumers, leading to price hikes.
He added that if CCCA becomes a law, swipe fees will be reduced and a new market competition could start. But, some American airlines call this bill a "bad policy" because it could undermine their rewards programs.
Why CCA is 'Bad Policy'
Southwest Airlines claimed that CCCA would undermine or even end credit card rewards programs offered by travel companies.
"This legislation is bad policy and would undermine, if not completely end, credit card rewards programs that millions of Americans rely on for their vacations or personal travel needs," said the Texas-based flight service provider.
Aside from this airline, The Daily Mail UK reported that United Airlines also opposes Durbin's proposed credit card swipe fee legislation.
United Airlines CEO Scott Kirby explained that CCCA is a bad policy because it could "kill" rewards programs if ever passed into law.
Southwest Airlines and United Airlines both argued that CCCA would negatively affect flight rewards programs because this legislation could drastically reduce the revenues of Mastercard and Visa.
If this happens, these payment networks would be less incentivized, forcing them to remove the loyalty rewards programs they offer to return the revenue they might lose.
Of course, airlines will also experience CCCA's impact since they could lose lots of revenues because they rely on credit card issuers to earn billions of dollars.
"Our customers certainly like them a lot. And so I think it'd be hard in Congress to take a vote that 84% of your voters are going to be upset with the outcome of that vote," said Scott Kirby.
