New Bill to Diversify Credit Card Processing Market
More than 1,700 merchants including giants such as Walmart and Target are urging lawmakers to pass legislation that would diversify the credit card processing market.
Currently most credit card transactions are run through Visa and Mastercard. A bill introduced in July, would give merchants the right to route many credit-card payments over other networks other than Visa and Mastercard.
In a letter this week to all members of Congress, the merchants said the proposed legislation would increase competition, leading to a reduction in credit card processing fees, which are some of the highest in the developed world. “In 2021 alone, U.S. merchants and consumers paid nearly $138 billion in card fees,” the letter says.
Sen. Richard Durbin, who is one of the sponsors of the bill, championed a similar rule for debit cards more than a decade ago. The Durbin amendment, part of the 2010 Dodd-Frank law, requires banks to enable at least two unaffiliated debit networks on each card.
The new bill would direct the Federal Reserve to require large banks that issue credit cards to enable at least one alternate network, other than Visa or Mastercard. The rule would apply on Visa or Mastercard credit cards that are issued by banks with more than $100 billion in assets.
Currently, most domestic credit card issuers pair up with one of the two major networks, Visa or Mastercard. The network is typically listed on the front or back of the card, where most likely you will find the Visa or Mastercard logo. Some networks like Discover and American Express issue their own cards as well.
When a shopper uses a credit card, the merchant pays a variety of fees, including an interchange fee that is set by the network and collected by the card issuer. Visa and Mastercard together handled roughly 77% of all general-purpose credit-card spending last year.
Lawmakers are expected to receive another letter Wednesday signed by more than 150 merchant trade groups, WSJ reports.
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Wow. Just wow. The only thing this bill would do is gut rewards programs while increasing profit margins for retailers, as evidenced by the lack of lower prices the last time they did this.
Praising this is pure ignorance.
I wholeheartedly agree. The greedy CEOs of these corporations are only thinking about their salary bonuses based upon year end sales profits and NOT the customers as they do NOT pass on savings to the consumers but use the added profits on stock buybacks to further increase the cash out value of their stock options. Thanks for making all aware of their past when similar legislation was passed!
Imagine a world with 1X on credit card spending. Imagine a world with low sign-up bonuses.
This would likely lead to the end of many credit card rewards. Horrible idea!
The Durbin amendment was a disaster, leading to a large unbanked population (since debit transactions were no longer profitable, many banks stopped offering fee-free accounts without other profitable activities).
And in what world do price caps lead to more competition? If anything, regulating the profit available in an industry will keep out competition (since they won’t be enticed to enter by big margins).
This is a ploy by large retailers to get service (credit card processing) at lower cost by using the government for their benefit. This isn’t something that will benefit consumers.