This Expert Says the Credit Card Competition Act Won’t End Credit Card Rewards

Have you heard of The Credit Card Competition Act? There’s a lot of buzz around this bill, which was reintroduced to the Senate on June 7 (it didn’t pass Congress last year). If approved, the bill could bring changes to the credit card landscape. The idea is that it would expand competition in the credit card market, resulting in lower fees for merchants whenever clients use their credit cards to pay for transactions.

Some experts believe that this will lower prices, while others are worried that merchants won’t decrease their prices. Moreover, there are concerns that credit card issuers may put an end to credit card rewards programs to make up for the losses in profit.

Why credit card rewards are not likely to disappear

Before panicking, consider what Stephanie Martz, chief administrative officer and general counsel of the National Retail Federation, told CNET. She believes it’s unlikely that rewards programs will disappear, and that while banks may raise interest rates to compensate for lost profit, they will still need to remain appealing to consumers too.

Take, for example, a commonly used reward program by Wells Fargo. It includes a welcome offer and cashback on purchases. If the credit card landscape becomes more competitive, an established bank like Wells Fargo probably won’t benefit from ending those perks. Big banks will want to retain their existing clients and attract new ones to gain market share. It’s possible that they’ll have to cut into something like their welcome offers, but they will still want their rewards program to be attractive.

Competition tends to benefit consumers

Competition tends to benefit consumers by fostering lower prices, higher quality, innovation, increased variety, improved customer service, and market responsiveness. While companies may face profit losses, these challenges drive efficiency and innovation, leading to better products and services. Passed-on costs are often offset by the broader advantages of competitive markets, ensuring consumers have access to a diverse range of affordable, high-quality offerings, and encouraging businesses to meet changing consumer demands more effectively. Well-regulated competition prevents anti-competitive practices, ensuring consumers enjoy these benefits without unfair drawbacks.

Bottom Line

It’s too early to tell whether the Credit Card Competition Act will pass and how it will affect you as a credit card user. But it’s unlikely that credit card rewards will disappear as a result.