Credit Card Rewards No More?

By Robert McGarvey

Are we facing a doomsday wipe-out out of rewards and perks associated with Visa and MasterCard (but not American Express – more on that below)?

Fact: Senator Dick Durbin (D- IL) has introduced the Credit Card Competition Act of 2022.  The bill is written in the opaque language much favored by Washington DC power brokers but if you believe rewards experts like Brian Kelly of The Points Guy, this is potentially a very big deal. “This bill is an existential threat to the loyalty ecosystem,” said Kelly in a webinar last week.

Understand, however, airline miles distributed by the carriers would not be impacted. Neither would American Express, although it isn’t clear why Amex is exempted.  Fine by me however because I have gotten many more rewards from Amex than from all my other cards combined.

What would be the impact of the bill? It’s backed by big retailers (think Walmart and its ilk) who grumble about the few points they pay card issuers for processing a transaction. The Durbin bill would give retailers the right to put transactions on any rails they please – think lower cost – and that means the money flowing into the traditional issuers necessarily would decrease.

So? Well, it might in fact be a big so. There are worries for all of us with this new Durbin bill. I get Diners points (worth 2.1 cents apiece per TPG), Venmo rewards me with Bitcoin – if you call that a reward (I’m down 30.6%!), REI rewards me via Capital One, 5% cashback on purchases at Amazon ($560+ so far this year). Some hundreds of dollars – maybe thousands? – flow to me annually.   

And then there are the many and varied consumer protections card issuers have offered to lure consumers into their cards. That’s everything from airport club access to extended warranties.  

Would I be willing to surrender these perks and protection in return for meaningful price discounts? Very possibly. Personally I find the points accumulation game tedious and time consuming. But are discounts in fact on offer?

NerdWallet looked at what happened with credit cards in the UK and Australia where so called interchange rates have been capped at low amounts for some time and – as expected – credit card rewards are meager and more cards now have annual fees.  Could that come to the US? Possibly.  

Merchants, meantime, say that with lower processing fees they could lower prices paid by consumers. But there is no requirement in the legislation.

In effect I am compelled to give up something that tangibly benefits me with no obvious deal sweetener for me. Why would I support this?

This is the key question: is there any chance the Durbin bill will be enacted into law this year. Definitely not as such – there just aren’t enough days on the calendar for hearings.

But as a Congress winds down it often passes an Omnibus bill which, as the name implies, is a grabbag of miscellaneous hunks of legislation.  Horses get traded, lines get added to the bill, others get erased.  Could this Durbin bill be pasted into the Omnibus?

Yep.  

What’s the probability? Not high, say the people who monitor these doings for a living. But lameduck Congresses are always unpredictable.

There’s enough worry on the parts of card issuers that they this week unleashed a media blitz to torpedo the bill. According to Bloomberg, “The satirical ad campaign features a town called “Point Less, Kansas,” where citizens have lost all of their credit card reward points. The ads show empty airports and hotels, which have been deserted because people aren’t allowed to use points to book flights and hotels.”

The video is rather funny. But a world without points might not be fun.

There’s also a tsunami of anti Durbin op-eds flooding newspapers across America.

Know too that the Durbin bill is not an especially partisan bill. It can get support (or opposition) from both sides of the aisle. This also is a big business brawl. It’s big processors and issuers versus big retailers.

Where are us, the pubic? Nowhere to be seen. The trickiest bit right now is that knowledge of this measure among the public is slim.  

And if it’s buried in an Omnibus bill it likely could become law without anybody noticing.  

Now’s the time to write your US Senators and member of the House.  Here’s a tool to find yours.  

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Delta Lost Hiking Poles Update. Regular readers will recall that I noted that my hiking poles went missing on an October flight from Madrid to Atlanta to Phoenix. They made it to Atlanta but they fell off the radar.

I filled out the Delta forms and, honestly, had forgotten about them.  

This morning – December 5th – they showed up at my apartment.