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Proposed legislation aims to reduce "swipe fees," but could it cost you credit card perks?

Critics say proposed federal end legislation could spell end of credit card rewards
Critics say proposed federal end legislation could spell end of credit card rewards 04:16

CHICAGO (CBS) -- Lots of people pay by credit card to get cash back, or rewards for things like air travel or hotel stays. Those reward points could be in jeopardy if you believe critics of legislation in front of Congress right now.

The bill's co-sponsor, U.S. Sen. Dick Durbin (D-Illinois) said the naysayers are overblowing its effects. He claimed his proposal would benefit all consumers.

CBS 2's Lauren Victory looked inside the heated debate.

Liz Wentick stays on top of headlines, especially ones that affect travel – her favorite activity. She and her husband have visited all seven continents.

"Last year, we went ... we flew to Singapore for free," she said.

The flight was free because they paid with miles; rewards the Downers Grove couple accumulated using their United Airlines credit card.

"We charge everything on our credit card," she said.

Their points might become pointless, according to United CEO Scott Kirby, who is among several airlines executives pushing a campaign to kill a federal bill they claim will kill travel rewards programs.

"Last year, 15 million Americans booked air travel with points from airline credit cards, but that would all end if Congress passes the Durbin-Marshall credit card bill," their ad campaign claims

Their beef is with legislation co-sponsored by Durbin and U.S. Sen. Roger Marshall (R-Kansas), known as the Credit Card Competition Act. 

Durbin has said the bill could help millions of Americans struggling with inflation. To understand his proposed solution, CBS 2 needed to know more about the problem.

Martin Sandoval said he wishes he could lower prices at Food Market La Chiquita in Cicero, but said margins are thin in the grocery store world, and something called "credit card swipe fees" eat into profits.

"It's one of the highest expenses that we have," he said.

"Swipe fees" are charged to a business when a customer makes a credit card purchase, so money from his or her account makes it to the merchant.

About 2% of the amount charged to a customer's credit card goes to "swipe fees" to pay for credit card processing. That leaves the grocery store with $98 out of every $100 customers spend with credit cards.

"In order to offset those 2%, we have to charge a little bit more to customers," Sandoval said.

It all adds up. Sandoval said, across 10 locations, Food Market La Chiquita paid more than $45,000 in "swipe fees" in the month of May alone. 

That amount is likely to increase, because the-ever popular Visa is changing its rates.

Victory: Have you ever thought about not accepting credit cards anymore?"

Sandoval: "No. No, no, no. It's impossible now."

Sandoval said it's also impossible to shop around for a better swipe fee rate, because a lot of banks only offer one credit card processing system.

"There's no negotiation, there's no competition," Durbin said.

The Credit Card Competition Act would mandate banks to offer "at least two credit card networks." Durbin said that would create "competition and choice" that would "incentivize better service and lower cost."

Sandoval used a simple bunch of bananas as an example of the impact of "swipe fees."

"If I'm making 10 cents on this, and one cent ... is going to the credit cards, if we can lower that, if we can get rid of that 1 cent or 2 cents, or whatever, we'll be able to adjust the price of bananas," he said.

One cent or two, Brian Kelly, founder of The Points Guy travel website and blog, wants "swipe fees" to be left alone, because some of that money is used for consumer perks.

"That's where your credit rewards, your cash back, and all of your fraud protection comes from," Kelly said.

Full disclosure: Kelly is teamed up with some credit card giants.

"Points and credit card perks, that's how people are traveling these days, with the skyrocketing cost of airfare," Kelly said. "The Credit Card Competition Act, quite frankly, would put a huge damper on consumers' ability to earn points."

Again, the "Protect Our Points" campaign is from an airlines advocacy group. The message: messing with "swipe fees" would mess with your vacation.

Many travelers are nervous.

"They're businesses, and businesses won't lose money, so I believe them. They're going to balance the scales some kind of way," said Damon Ross, who uses reward points to travel.

"For us, the reward points are like gold," Wentnick said.

A gold ticket, and a red-hot debate.

Durbin's proposal is stalled in Congress, and the senator continues to push for a vote.

This is an incredibly complex topic with widely varying opinions. If you'd like to learn more about the different perspectives we have several links below:

The Points Guy: Explaining the Credit Card Competition Act and what it means for your credit card rewards

Durbin Summary of the Credit Card Competition Act

Durbin, Marshall, Welch, Vance Introduce Bipartisan Credit Card Competition Act

Protect Our Points: Don't Take Away Airline Credit Cards

Airlines Take Stand Against Proposed Credit Card Bill

Estimate Shows Credit Card Competition Act Would Save Merchants and Consumers $15 Billion a Year

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