Legislation that MAY affect Credit Card REWARD Programs that LOTS of Sellers use.

[mam98031]

I encourage everyone to read up on this subject as it could greatly affect many of us for a variety of reasons.

https://www.congress.gov/bill/118th-congress/senate-bill/1838/text?s=1&r=3

Here are some Excerpts from a CBS article:

The bill in question is called the Credit Card Competition Act of 2023 and the idea behind the legislation is to reduce the so-called "swipe fees" retailers pay every time a customer uses a credit card, which is usually about 2% of the purchase. The bill would allow more companies to process transactions, which should drive the cost down.

The problem, according to Kelly, is that those fees also fund the rewards programs. 

"It's like taking our points and putting that into the hands of these huge retailers and it's not going to turn out well for consumers," he said.

Bill Rennie of the Massachusetts Retailers Association sees it differently, saying that smaller retailers are struggling under the weight of those fees. 

"For retailers, after labor, credit card fees are probably your second highest cost," he said. "So we all love our rewards points, whether it's miles or cash back, or whatever. But we have to recognize there a cost to providing that, and it's a significant cost."

Rennie also said that retail pricing is incredibly competitive, and the elimination of those fees would leave room for retailers to reduce their prices.

The travelers we spoke with said eliminating rewards programs would have real consequences for their families. 

https://www.cbsnews.com/boston/news/credit-card-competition-act-of-2023-reward-programs-bill-swipe-f...

This really is a complex subject and deserves some discussion.  I can see where this can be really concerning to many, to include me.  

Saying that the Retailers could save enough money so they could lower pricing IMHO is a false statement.  Well maybe not false, because they certainly could lower pricing.  But would they is the question?

We have recent history to lean on for this.  During the Pandemic we had our costs of food, gas and so much more skyrocket.  Now that inflations is down in the neighborhood of what we are use to, are we seeing these commodity prices come down too?  I'm not where I live.

I just felt this would be a good discussion to have and help us all learn from each other.

[xadexane]

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@mam98031 wrote:

I'm not where I live.

I just felt this would be a good discussion to have and help us all learn from each other. 

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Indeed, if you're no longer in your physical form? Needs discussion.

[richard1rst]

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@mam98031 wrote:

This really is a complex subject and deserves some discussion.  I can see where this can be really concerning to many, to include me.  

OK I’ll start the discussion. I’m guessing Bill Rennie never ran a retail store (his membership notwithstanding). To say that the 2% CC fees are the second highest cost is absurd. I ran a B&M store for 40 years (yes, I have been around that long). Rent was always WAY MORE than 2% of sales. Ditto Utilities and Insurance.

First he talks about driving down the costs and then he talks about the “elimination of those fees”. Does he really think the CC companies will work for free? And if it does “drive down” the costs what would it lower them to? A 10% reduction in fees makes the fee 1.8%. Does he really think that a retailer is going to reduce the price of a $100.00 item by 20 cents? (that is the difference between 2% and 1.8%.)

It should be noted that the bill in question is completely silent on the CC rates. So Bill Rennie's comments are completely superfluous. Its sole purpose seems to be adding another layer of bureaucratic paperwork which, more likely, will raise compliance costs to the CC companies and, in turn, to us.

If some company could figure out a way to do it cheaper it would already be happening. That is what Capitalism calls "creative destruction".

This is just another politician with absolutely no real world business experience trying to boss us around following the bureaucrats mantra: Goals not achievements..

[ajs_coins_and_alchemy]

Hoping you're right that this is inaccurate or overblown.

I like my CC rewards... I like them a LOT. I've recently been buying direct from a supplier, not using a CC, but all my prior buying and my current buying not from this supplier, is done on eBay (for resale)... I get 3.3% in effectively EBay credit (to be spent on EBay only) plus I get 3% currently (used to be 4% and as high as 5%) through a bonus rewards cash rebate from CapitalOne Shopping App (not CC usage related, just go into the app, use that app to get to the EBay site and make the purchase, get cash rebate).

So I get 3.3% in effectively "EBay bucks" (not the actual eBay bucks program) + 3% (sometimes 4% or 5%) in cash. Who can go wrong with 6.3% (or 7.3%-8.3%) in rewards? Especially when you spend $6k-$10k (and now even more) per month...? 

Don't touch my rewards 😡 there will be hell to pay 😈

[dbfolks166mt]

     I have to agree with richard1rst on several points the first being this is just another example of a politician who has NO clue how things work. According to the Merchants Retail association the average swipe fee is 2.24% and most retailers have simply baked the swipe fees into the pricing of their items the same way eBay sellers, at least the business savvy ones, bake the cost of the FVF's into their pricing of the item along with any other costs like shipping if they are offering free shipping. EBay probably does the same with regards to baking the swipe fees they pay to the CC companies into their FVF's although they may get some special rate from the CC company, who knows. I actually have a number of retailers in my area that offer discounts for paying with cash. 

     In reality the swipe fees even at 3% only represent $3.00 on a $100 consumer purchase. As mentioned earlier this is a minimal business expense for most retailers and while the total aggregate is substantial it is NOTHING compared to the interest revenue CC companies get every month from card holders. The current average interest rate on credit cards is around 15% and can be as high as 28% which cost consumers a LOT more than the estimated $1K in swipe fees. Even if the bill passes I cannot see retailers or other business lowering their prices or eBay lowering their FVF's but simply adding the savings to their revenue stream. 

    If the bill passes it may however necessitate the CC companies looking at the dead beat CC holders. Those are CC holders that pay off their balance every month an represent $0 in revenue from that side of the equation. The only revenue the CC companies get from those card holders is the swipe fees the merchants are paying.   The following article counters the rumor that reducing or eliminating swipe fees would threaten rewards programs and includes some historical data to support the counter. 

https://merchantspaymentscoalition.com/new-study-says-swipe-fee-bill-would-not-lead-to-loss-of-credi... 

[luckythewinner]

Now that inflations is down in the neighborhood of what we are use to, are we seeing these commodity prices come down too?

When inflation eases, prices do not come down. The rate of increase just slows. Deflation is what reduces prices.

Inflation: "a general increase in the level of prices in the economy"

Deflation: "a general reduction in the level of prices in an economy."

[dhbookds]

Agree that the eliminating the swipe fee would not necessarily reduce prices........  Since the laws changed and merchants CAN reduce prices if paid in cash.....I've only seen one gas station that offers that option....... I think it's about a 5c reduction per gallon. 

Also agree that the cc would "go after" those that pay off every month.......for those old enough to remember.....at one time, there was a yearly (?)  fee for having a credit card......

[mam98031]

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@xadexane wrote:

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@mam98031 wrote:

I'm not where I live.

I just felt this would be a good discussion to have and help us all learn from each other. 

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Indeed, if you're no longer in your physical form? Needs discussion.

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@xadexane 

Would you mind explaining your post a bit more?????

[mam98031]

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@luckythewinner wrote:

Now that inflations is down in the neighborhood of what we are use to, are we seeing these commodity prices come down too?

When inflation eases, prices do not come down. The rate of increase just slows. Deflation is what reduces prices.

Inflation: "a general increase in the level of prices in the economy"

Deflation: "a general reduction in the level of prices in an economy."

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I didn't say it Does come down, I said it Should.  I'm aware of how it works as I've been around for quite a few years.

[tobaccocardyahoo]

As a merchant, I have always resented funding rewards programs with the swipe fee.

As a consumer, I collect my rewards and have the cash transferred to a brokerage account.

On the whole I support the reduction of the swipe fee at the expense of rewards.

[lux.ra_14]

Wake me if and when it gets closer to becoming a real thing.

It's in the earliest stage of how a bill becomes a law. It has to pass out of committee, clear the Senate with 60 votes, go through another committee process and pass the House, potentially go to a conference committee to resolve any House-Senate differences, get final approval in both chambers, and then get signed into law by the president.

Chances are small that it goes all the way in a bitterly divided Washington. Not really worth worrying about at this point.

[mam98031]

@lux.ra_14 

They are still managing to get things passed.  So if you are just going to wait and depend on the conflict between Republicans and Democrats to prevent this from going into law, you will likely get a big SURPRISE one day soon.

This can help you see what has been accomplished.  There are tabs at the top so you can drill it down to what you may like to see.

https://legiscan.com/US/legislation/2023

[postcardcountry]

Things I have noticed in my world ----

Companies charging you 3% to use your credit card.

Companies  requiring a minimum amount of $10 or $20 to use your credit card.

My favorite diner / cafe is offering a 2% discount if you pay in cash.  I have always paid them in cash.  So I keep calculating my tip the way I always do and let the waitress get the that 2% (as small as it is) in addition to her normal tip.

Curious, was there any mention of the transaction fee that comes with the credit card fee? 

[lux.ra_14]

The chances of this becoming law are slender at best. Most DC journalists don't cover stuff that hasn't even had a committee hearing yet. The CBS story was deficient in not setting any context.

Meanwhile, Congress is having a hard time figuring out how to keep the lights on before the government shuts down at the end of the month. That's much more of an immediate possibility.

BTW, the link you provided just shows a bunch of stuff being referred to committees. As noted above, that's the first baby step for a bill to become a law. It's no guarantee of anything. 

[powell-memorabilia]

Prices, in general, should not come down when inflation eases.  Example:

Starting price of a basket of goods: $100

Inflation: 100%

New price of basket of goods: $200

Reduced inflation rate: 2.5%

Updated price of basket of goods: $205

No, we shouldn't see commodity prices, on average, come down if we're down to a "what we are used to seeing" inflation rate.  Yes, we do need deflation to see an on-average reduction of prices.