I’m quite happy to see The Points Guy turn political and ramp up lobbying efforts to defeat a Congressional bill that would undermine credit card rewards. We all need to join the effort to push back against a poorly intentioned and highly counterproductive bill that will take money from all credit card consumers and redistribute wealth to retailers rather than help the poor.
The Points Guys Ads At Washington National Airport
Walk through Washington National (DCA) and you may notice a bright yellow sign from The Points Guy:
The Credit Card Competition Act would undermine consumer credit card rewards. Capping fees through forced competition would make it impossible to continue to offer the current portfolio of benefits on many card products. Perversely, it would encourage loyalty programs to devalue in order to continue offering earnings at today’s rates. We see that when we look at Europe or Australia.
But while that may be my primary concern, the fundamental problem with the act is that it would represent the federal government forcing payment networks to provide their services to retailers at a lower price. That sort of meddling is unwelcome and ends up hurting the very people it intends to help.
Why this bill and why now? We are entering an election year and both Republicans and Democrats are attempting to maximize support from large retailers, who support this measure because it represents a wealth transfer to them from credit card processors. But these retailers enter into those relationships voluntarily and the ability to accept credit cards provides protection against fraud and encourages consumers to spend more. No one is forcing retailers to accept credit cards.
Lobbying efforts in favor of the bill are ramping up and The New York Times ran an ignorant and misleading video today advocating for this bill. The NYT, and its shills, essentially argue that store owners raise prices to compensate for the credit card interchange (swipe) fees they must pay, meaning everyone pays more. But the poor get hurt because only those who have fancy credit cards are getting rewards.
That’s bunk. As noted by View From The Wing, who has truly been a thought leader in exposing how counterproductive this bill would be, the justification for the bill rests on two false premises:
- Credit cards are more expensive for merchants to accept than cash
- If merchants were not paying higher prices for credit cards, prices to the consumer would fall
On the contrary, cash is more expensive to handle due to theft, fraud, and the cost to insure it. Those retailers who offer cash discounts are likely doing so for tax avoidance purposes.
More importantly, in places where interchange limits have been limited, consumer prices have not fallen. Instead, retailers just pocket the savings and consumers end up losing out, both poor and wealthy (see Australia and Europe). Indeed, in Australia credit card fees rose after interchange was limited, thereby reducing access to credit cards precisely for those least able to afford them.
There is not a problem here that requires a solution. Members of Congress need to keep their hands off our credit card rewards and recognize the system, in its current form, works.
The Points Guy may reduce the message when it simply says Your Vacation Is At Risk, but it is quite correct. Kudos for the ad, which I hope shows up in more airports than DCA.
The Credit Card Competition Act is horrible for consumers, full stop. It will hurt those across all income ranges that use rewards cards and will not lead to price breaks for the poor. It is foolishness to suggest otherwise.
Let’s not forget that Senator Dick Durban (D – Illinois) destroyed debit card rewards with similar legislation in 2010 and now seeks to do the same for credit card rewards. Consumers were hurt, not helped, on the basis of his 2010 bill that was approved by Congress and signed into law.
Please contact your representatives in Washington, DC and tell them to reject this bill.
It is good to see TPG use some of its influence to remind folks that The Credit Card Competition Act would hurt the very people it intends to help.