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The credit card competition act it's a Very Noble sounding name for a bill that Could change the U.S credit card Industry as we know it and change it for The worse hi I'm Ben Hedges I post Videos almost every day on Personal Finance credit cards and how to use Credit card points for luxury travel if You like the sound of that feel free to Follow me here on YouTube and you can Also follow me on Facebook Tech talk and Instagram for more Snappy up-to-date Content my usernames and handles are on Screen now so on June 7th 2023 Senator Dick Durbin introduced a bill to the Senate now Durbin is a Democrat but the Bill does have three other co-sponsors Two Republicans and one other Democrat So it is a bipartisan Bill and this bill Seeks to make credit card processing Fairer or so they say but fair for who Will buy the looks of it fairer for the Major retailers and it could possibly Hurt the consumer now I read the entire Bill so that you don't have to that's a Joke it's just blank pieces of paper It's like a three-page bill but the gist Of this bill if it passes is that credit Card companies will no longer be able to Restrict their cards to just one payment Network now credit card payment networks Are companies like Visa Mastercard etc Those are separate from the banks that Issue your credit card so here's an
Example with this card uh the issuer is Credit One bank and okay I'm just Holding this one up as a joke guys never Get a Credit One credit card they suck But anyway The issuing bank is Credit One and the Payment network is Visa okay that's the Network the electronic Network that Actually lets the payment go through Then there are some banks notably American Express that they issue the Cards and they are the payment Processing Network so you can see on This AMEX card there's only the American Express logo no other payment uh Network Because they both issue the card and They provide the payment Network for it And discover is another example of a Bank that is both an issuer and a Payment Network for their own cards now These four companies have a monopoly Visa alone made up 52 percent of the US Market in 2021 with MasterCard and Amex Also having big shares and this means That if they want to charge High Interchange fees that is the fee that The merchant or retailer pays when the Card is swiped no one can really stop Them have you ever visited a store and They say they don't take American Express well that is because American Express is Merchant fees or interchange Fees are generally higher than those Other networks so many stores would like
Visa or something else instead but now The credit card competition act if it Passes is saying that credit card Issuing banks will have to allow their Cards to be used over not one but two Networks and these two networks cannot Be networks that are owned by the same Company or affiliated with the same Company and cannot be two networks that Have the largest market share either so If your MasterCard you couldn't do a Deal with Visa because then you would Have the two biggest networks on the Same card and that wouldn't be allowed Under this new law so they'd have to go For Mastercard or an even smaller Network like Star which you've probably Never heard of but what is the problem With this well it is the network that Sets The Interchange fees so if a store Has a choice to run your AMEX card over Either the American Express Network Which might be more expensive or a Second smaller Network that charges Lower fees they are going to choose the Smaller network with lower fees but Typically it is those interchange fees That pay for your credit card rewards Like cash back or points and Miles that You can use for free flights and free Hotels but now Amex for example isn't Getting those fees maybe they're getting A portion of a smaller fee on some other Secondary network but it's not enough to
Pay for such juicy rewards actually the Electronic payments Coalition identifies Three key areas where this bill will Have a negative effect it eliminates Credit card rewards fraud protection and Cyber security will decline because Smaller networks may not have the means To provide such Advanced security Measures and it could reduce access to Capital and credit so basically credit Card costs would go up like fees because Those companies have to make money Somehow and perhaps they may even stop Issuing credit cards to some more Riskier borrowers in the UK they have Limits on how high credit card Interchange fees can be and check out The difference between the US and UK Versions of the AmEx platinum in the US The welcome bonus on the AmEx Platinum Is 80 000 points but in the UK it is a Pathetic thirty thousand points and what Is more you can only get that thirty Thousand points if you haven't had a Personal membership rewards enrolled AMEX card in the past 24 months it is Incredibly restrictive and that is Because of the limit on interchange fees But would that happen here in the US Would Card issuers roll back the Rewards Or would they in true American Capitalistic style find a way to get Around it well it has actually happened Here in the US before with debit cards
And the same Senator Dick Durbin passed The Durban Amendment to the Dodd-Frank Act in 2010 and we'll tell you what Effect that had on debit cards but first If you do have a lot of credit cards and You struggle to keep track of all your Transactions your balances your rewards And cash back balances Etc you will love The sponsor of today's video match Rewards it lets you pull data from all Of your credit cards even if they are From different issuers in one easy to Use dashboard it also tracks bonus Categories even the ones that change on A quarterly basis and tells you which Card to use where and at what local Retailer for you've guessed it the max Rewards while you still can in addition If you have Amex cards the pro version Of Max rewards Max rewards gold Activates all of your Amex offers for You adding them to your card so you Never miss a deal and you can get a free Month of Max rewards gold with my link Below or just download the app and check Out the free features so the Durban Amendment passed in 2010 and by 2011 the FED had brought in rules to limit debit Card interchange fees to 0.05 of the Transaction plus 21 cents and that Destroyed debit card rewards now you may Be thinking debit card rewards debit Cards don't play Rewards well that's Right because of the Durban Amendment
Some debit cards back pre-2011 did Actually have rewards programs but all Of those are gone now because of the Durban Amendment and according to the Electronic payments Coalition retailers Are 145 billion dollars better off Because of the amendment and they didn't Pass any of those savings onto consumers Only 1.2 percent of them lowered prices After the rules on debit card fees Passed and 22 percent of them actually Raised their prices so would that happen If this new act about credit cards Passed well the credit card competition Act is a little different because it Doesn't limit the amount of fees charged It just forces credit card issuers to Have two different payment networks on Their cards but would it be possible for Deals between Banks and those secondary Networks to be done where they say look If you want to be a secondary Network on Our card we issue rewards credit cards So we need a certain level of Revenue to Be able to make our cards work will you Provide that will you raise your fees Perhaps you'll discover the CEO of Chase Playing golf with the CEO of star Payment networks well maybe but the text Of the bill does say that the two Networks cannot be owned or controlled By Affiliated persons so we'll have to See what specific rules are made on that I'm guessing they'll have to keep their
Distance but there isn't anything in There that says a smaller Network Couldn't make a competitive offer to say Chase or American Express saying hey let Us be the secondary Network on your card And we'll match your interchange fees But then you could on the other hand Have big box retailers like Walmart and Costco doing deals too okay maybe they Will select a preferred secondary Network and say look you can now only Use this network at our store so all of Those credit cards will have to offer That Network as a secondary Network on Their cards so that people will still Shop with their cards at Costco Walmart Etc small businesses on the other hand Won't have the sales numbers to be picky And we'll probably have to just accept Whatever Network they can get so it Could get messy with big box retailers Benefiting and smaller businesses and Consumers losing out and that's probably Exactly why Walmart and Target are Lobbying to get this bill passed but Guys what do you think will happen leave Your comments below also don't forget to Get a free month of Max rewards gold in The description below please subscribe To the channel if you're new we'll see You next time bye
