The White House is on a mission to cut what it calls credit card “junk fees" out of circulation, but some business leaders say the legislation goes too far.
On October 11, President Biden presided over a White House event calling for a “crackdown” on junk fees and bringing down costs for American consumers. Junk fees are “hidden, surprise fees that companies sneak onto customer bills, increasing costs and stifling competition in industries across the economy,” the White House noted in a statement.
The White House gathering focused on the various ways Congress could help cut credit card fees, especially those onerous swipe fees that card providers charge at the point of sale. Congress has taken action on the issue, with the pending Credit Card Competition Act of 2023 amendment attached to a larger government funding bill currently awaiting Senate deliberation.
The fees are charged by major credit card providers like Mastercard and Visa, who charge up to 3% of the total bills at merchant locations. A portion of that amount called the “interchange fee” is paid to the bank sponsoring the card. Such fees certainly add up. Between Visa, Mastercard, and sponsoring banks, merchant-related credit card fees totaled $93 billion in 2022, according to federal government figures.
Now, multiple U.S. airline chief executive officers say the amendment threatens airline loyalty programs used by millions of flyers.
“This would kill rewards programs,” United CEO Scott Kirby stated on an October 18 conference call, as first reported by Bloomberg. “It would not exist anymore. It’ll kill debit card rewards programs, too.”
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Kirby is hardly alone.
The legislation would trigger an “unbelievable” reaction from travel consumers accustomed to relying on travel rewards to schedule discounted flights, not to mention hotels and rental cars, as well, other airline executives say.
“Those cards could no longer receive the funding to be able to invest in rewards-back opportunities,” said Delta Chief Executive Officer Ed Bastian in a separate Bloomberg interview. “It’s something that we’re watching, obviously.”
Legislative advocates say that curbing credit card fees at the register is an idea whose time has come.
“Credit card swipe fees inflate the prices that consumers pay for groceries and gas,” said U.S. Sen. Dick Durbin, D-Ill. said in a statement. “It’s time to inject real competition into the credit card network market, which is dominated by the Visa-Mastercard duopoly.”
There’s no disagreement that airline loyalty rewards represent big business for companies like Delta and United.
For example, Delta Airlines Sky Miles loyalty program has a $28 billion valuation in 2023, according to Statista. American Airlines’ AA Advantage rewards program clocked in at second place, with a $23.9 valuation.
The legislation has to clear both houses of Congress and as card providers and airlines are backed by powerful industry lobbyists, imminent passage of the amendment is up in the air.
If you ask an airline executive, billions of airline reward dollars are hanging in the balance.
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