- The Credit Card Competition Act would lower credit card swipe fees.
- Major airlines have said that the bill could reduce or completely end travel reward programs.
- About 40% of American credit card users have a card that is co-branded with a major airline.
When Jess Bohorquez stayed in a luxury hotel with a view of the Sydney Opera House, she didn't pay a cent.
The influencer and creator of "Points By J," a platform that teaches people tricks for low-cost travel, said she uses credit card points to upgrade her vacations and teaches her audience of over 180,000 Instagram followers to do the same.
Since she started accumulating travel points a few years ago, Bohorquez told Business Insider she's gotten discounted flight upgrades, free hotel stays, and trip insurance through her Chase credit card. She even has access to premium lounges at most airports.
"It gets you hooked once you have that first successful points deduction for free travel," said Bohorquez, adding that it's easy to get perks if you know the rules of your credit card. "It's such an exciting feeling."
However, those perks could be in danger of disappearing. The US credit card market is at a crossroads: Politicians and companies are struggling to compromise on how much card swipe fees should cost, who should get the money, and how all of it will impact consumers.
More than eight in 10 Americans use a credit card to make payments, get cash back, and build credit, according to The Federal Reserve. About 40% of those people have a card that is co-branded with a major airline.
Some lawmakers hope to bring more competition to the market, in hopes of limiting the power of major credit card companies and lowering fees. But airlines and travelers worry it could mean the end of rewards programs.
Major airlines' bottom line depends on credit card companies
The Credit Card Competition Act, which was introduced to Congress in June 2023 would require major banks to use at least one credit card payment network that isn't Mastercard or Visa — companies that control more than 80% of US credit card transactions — to introduce more competition into the credit card market.
Visa and Mastercard currently charge businesses about a 3% transaction fee when a customer uses their credit card. The more people that use a credit card, the more revenue banks and card companies make.
That's where airlines come in.
Airlines make money off selling tickets and offering in-flight purchases. But co-branded credit cards like Chase Sapphire Preferred, Delta SkyMiles, and the United Explorer Card are profit centers for banks and airlines.
The airlines sell banks "points." Credit card holders are then awarded those points for spending money with the co-branded card. Banks and credit card companies make money off of the swipe fees, and airlines only have to pay for the points if they are actually redeemed by travelers. It also makes travelers more likely to choose their specific airline whenever they fly.
Sen. Dick Durbin, a Democrat from Illinois, is the lead sponsor of the Credit Card Competition Act. In a statement to Business Insider, he said the bill would introduce necessary competition into the credit card market.
Durbin worries that major airlines are becoming like "credit card companies that fly planes."
"(Airlines) want to protect the billions of dollars in windfall profits they collect through sweetheart deals they have negotiated with the biggest Wall Street banks at the expense of consumers and local businesses," he wrote.
Durbin said his bill would not end travel rewards.
Credit card rewards incentivize travelers
Businesses typically make up for these credit card swipe fees by raising prices for customers. In theory, increasing competition and lowering swipe fees would translate into more affordable consumer prices.
This could mean cheaper — or at least more stable — prices for buyers, per NerdWallet.
Bohorquez, however, said increased credit card competition is unlikely to lower prices in practice. Instead, she said business airlines and credit companies will be less incentivized to offer loyalty perks like frequent-flyer miles and fraud protections.
Major airlines have already said the Credit Card Competition Act could end these reward programs. Southwest Airlines said in a statement to BI that it "strongly opposes" the bill.
"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," Southwest wrote.
United Airlines referred BI to Airlines for America, a lobbying group that represents the US airline industry. Delta and American Airlines did not respond to BI by the time of publication.
Airlines for America said in a press release from July that airlines believe credit card competition would harm their "ability to reward our most enthusiastic customers' loyalty and putting the viability of these programs at risk."
Still, it's unclear whether the Competition Act will become law. The bill was referred to the Committee on Banking, Housing, and Urban Affairs in July, but hasn't yet been passed by the House or Senate.
Until more movement on the bill occurs, Bohorquez plans to make the most of her rewards.
"I'm not terribly worried about our points going anywhere anytime soon," she said. "I hope that people continue to earn and enjoy their credit card points and take a lot of free trips."
Do you use your credit card for travel rewards? Have you saved money on a vacation by using points? Reach out to this reporter at [email protected].