Hi y’all —
The Glums are generally not a competitive bunch…
…but our Bananagrams games are notoriously intense.
There’s a lot of shouting and sabotage. We have house rules and high standards. Being invited to play is a rite of passage for newcomers, but if you spell a word wrong — or, God forbid, try to sneak in a proper noun — we will eviscerate you.
The competition can be fun, but it often comes with consequences (re: the shouting). That’s true in the financial world, too.
Just look at the Credit Card Competition Act, a piece of legislation that’s been floating around lately. It has potential ramifications for credit card processors, banks and rewards programs, which has made it a pretty hot-button issue. Critics on both sides are talking about it constantly even though the proposal isn’t before Congress yet.
What’s going on with the Credit Card Competition Act? How would it affect everyday consumers?
Let's start at the beginning.
The Credit Card Competition Act was introduced by Sens. Dick Durbin, D-Ill., and Roger Marshall, R-Kan., last summer. Though it didn’t go anywhere, the legislators have indicated they’re gearing up to introduce it again soon.
The nitty gritty details of the bill are all about network access and credit card transactions. Basically, every time I use a credit card at a store or online, the bank that issued me that card charges the merchant a fee. This is called an interchange, or swipe, fee.
The amount of the fee is set by the card processor, like Visa or Mastercard. The merchants have no say in the matter because Visa and Mastercard dominate the networks over which the transactions are routed.
“It is as if there was a milk cartel [that said], ‘We’re going to tell all the grocery stores how much to charge for milk,’ and they all said, ‘Sure, great idea, we’ll go with that,’” says Doug Kantor, general counsel at the NACS, a trade association for convenience stores and gas stations.
The fees are hefty. According to a 2022 report from payments advisory firm CMSPI, U.S. credit card interchange fees are some of the highest in the world — 1.8% compared to 0.3% in the U.K.
To cope, Kantor says, merchants often pass the fees onto consumers like me in the form of inflated prices. (That’s also why some small businesses put those legally dubious signs by the register about credit card surcharges.)