How the Credit Card Competition Act Could Impact Rewards Programs

The Credit Card Competition Act (CCCA) has been making waves in the financial industry, sparking debates among lawmakers, banks, retailers, and consumers. At the heart of the discussion is how this proposed legislation could reshape credit card rewards programs—a beloved perk for millions of cardholders. If passed, the CCCA would introduce more competition among payment networks, potentially lowering transaction fees for merchants. But what does this mean for the future of cashback, travel miles, and other rewards?

Understanding the Credit Card Competition Act

What Is the CCCA?

The Credit Card Competition Act is a bipartisan bill aimed at reducing the dominance of Visa and Mastercard in the U.S. payment processing market. Currently, these two networks handle over 80% of credit card transactions, allowing them to charge high interchange fees (also known as "swipe fees"). The CCCA would require large banks to offer at least two unaffiliated payment networks for processing transactions, opening the door for smaller competitors like NYCE, Star, or even blockchain-based networks.

The Goal: Lower Fees for Merchants

Retailers have long argued that high interchange fees—averaging around 2% of each transaction—cut into their profits. By introducing competition, the CCCA hopes to drive these fees down, saving businesses an estimated $11 billion annually. Supporters claim these savings could eventually trickle down to consumers in the form of lower prices.

The Potential Impact on Rewards Programs

How Rewards Are Funded

Credit card rewards aren’t free money—they’re funded primarily by interchange fees. Banks and card issuers use a portion of these fees to finance cashback, points, and travel perks. If the CCCA slashes interchange revenue, banks may have less money to allocate toward rewards, leading to:
- Reduced sign-up bonuses
- Lower ongoing rewards rates
- More restrictions on redemption options

A Shift Toward Annual Fees

To compensate for lost interchange income, issuers might increase annual fees on premium cards. Cards like the Chase Sapphire Reserve or American Express Platinum, which already charge hefty fees, could become even more expensive—or their benefits could be scaled back.

The Threat to Co-Branded Cards

Airline and hotel co-branded cards (e.g., Delta SkyMiles or Marriott Bonvoy) rely heavily on interchange fees to fund their loyalty programs. If revenue declines, airlines and hotels may devalue their points, making it harder for consumers to redeem them for high-value rewards.

Who Wins and Who Loses?

Winners: Small Businesses and Consumers (Maybe)

If merchants save on swipe fees, they could pass those savings to customers through lower prices—though there’s no guarantee. Small businesses, in particular, might benefit from reduced overhead costs.

Losers: Frequent Travelers and Big Spenders

Consumers who maximize rewards through strategic spending could see their favorite perks disappear. Travel enthusiasts might find it harder to earn free flights or hotel stays, while big spenders could lose out on lucrative cashback deals.

The Global Context

Lessons from Australia and Europe

Countries like Australia and EU nations have already capped interchange fees, leading to mixed results. In Australia, rewards programs became less generous, but consumer prices didn’t drop significantly. If the U.S. follows suit, we could see a similar outcome.

The Rise of Alternative Payment Methods

As traditional rewards programs weaken, consumers might turn to alternative options like:
- Cryptocurrency cashback cards
- Buy Now, Pay Later (BNPL) rewards
- Merchant-specific loyalty programs

What Cardholders Can Do Now

Maximize Current Rewards

If the CCCA passes, it may take months or years for changes to take effect. In the meantime, cardholders should:
- Rack up sign-up bonuses before they shrink
- Use points for high-value redemptions like international business class flights
- Diversify their card portfolio to hedge against devaluations

Advocate for Fair Policies

Consumers can voice their concerns to lawmakers, urging them to balance merchant savings with the preservation of rewards programs. After all, credit card perks aren’t just luxuries—for many, they’re a key part of financial strategy.

The Credit Card Competition Act is far from a done deal, but its potential ripple effects are undeniable. Whether you’re a casual spender or a rewards maximizer, this legislation could reshape how you use credit cards—for better or worse.