Will this bill make credit card usage cheaper?

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Your credit card will cost money even if you have no balance.

Key Point

• 175 million Americans use credit cards.
• Credit card processing costs retailers money and can pass those fees on to consumers.
• The 2022 Credit Card Competition Act is about to change that.

Cash is rarely paid these days. It’s so easy to pull out your credit card, tap to pay (I’m sick of contactless credit card technology), and get on with your day. Additionally, some credit cards offer cash back and other perks. I’m in good company According to the Consumer Financial Protection Bureau, 175 million Americans have at least one credit card of hers. Paying by credit card is faster and more secure than any other payment method, but it is not the cheapest payment method due to credit card processing fees.

These fees are generally not charged directly to you, the credit card user, but to the merchant that accepts credit card payments. According to The Ascent’s research, these fees range from 1.15% + $0.05 to 3.15% + $0.10 interchange fee, plus an additional 0.14% to 0.17% valuation fee. The two largest payment networks, Visa and Mastercard, actually increased their merchant fees in April 2022, which isn’t all that surprising given the rise in almost all costs.

Increasingly, merchants are passing on additional costs to you in some way. For example, you may find that your local restaurant adds a fee to using your credit card, or you shop at a small store that sets a minimum purchase amount (say, $10) for paying with your credit card. Maybe. However, the Credit Card Competition Act of 2022 seeks to save merchants credit card processing fees. How does it affect you?

Credit Card Competition Act 2022

In July 2022, a new bipartisan bill was introduced to the U.S. Senate. It seeks to spur competition by requiring banks with more than $100 billion in assets to use at least two affiliated networks to process margin transactions. One of them must be outside the Visa or Mastercard network. The intent is to save merchants credit card processing costs and ultimately save consumers money.

potential advantage

Saving retailers and consumers money is pretty good, isn’t it? For small merchants in particular, the bill becoming law could be huge for their bottom line. A fee of about 2% that you have to pay for , hurts your profit margins significantly. Also, as Leon Buck of the National Retail Federation said, he has more than two companies that can process credit card transactions, and they do so cheaper than Visa and Mastercard.

Potential Cons

However, security concerns also affect credit card processing. Craig Vosburg, Chief Product Officer at Mastercard, points out that the cheapest payment processors may not have the same security measures as big players like Visa and Mastercard. Lost revenue from credit card processing fees could hit consumers in other ways, said Greg Messac of the National Association of Federal Insurance and Credit Unions (NAFCU). Credit card issuers use these fees to pay their rewards programs. This is one of the biggest perks that come with using credit cards, so for the majority of Americans who use them, this is a big loss.

But Mike Calhoun of the Center for Responsible Lending disputes this, saying that while some rewards programs pay swipe fees, credit card issuers pay annual fees, interest, and late fees for consumption. He said it brings a lot of benefits to people. Additionally, reward programs are a way for credit card companies to attract and retain customers, so they are unlikely to go away completely.

what happened now

The bill may not pass in the current Congress, which ends on January 3, 2023. It has bipartisan support. The Credit Card Competition Act of 2022 could change Americans’ relationship with credit cards for better or worse.