Credit Card Rewards At Risk Of Going Away
Forbes: The Durbin Amendment Will Imperil Security and Innovation in the Credit Card Market
One of those amendments likely to be considered is Senator Richard Durbin’s Credit Card Competition Act, which would effectively prohibit consumers, payment networks, and financial institutions from determining how their credit card transactions get routed. If mega merchants can route their cards through a less expensive network, then interchange fees will go down, and Senator Durbin’s amendment assumes that if this occurs then consumers will see lower prices. However, there are no free lunches in a market to be had with such a regulatory intervention: Interchange pays for credit card rewards, the extension of credit, and the cost of protecting small businesses and consumers from fraud. Reducing interchange would cause credit card rewards programs to wither and more people would likely have trouble obtaining credit cards altogether. [Forbes]
Tag:credit card, rewards