Credit Card Competition Act Could Kill Your Rewards Program

The Credit Card Competition Act, reintroduced in Congress as the CCCA 2026, represents one of the most consequential pieces of proposed financial regulation in over a decade. Backed by Senators Dick Durbin and Roger Marshall, the bill targets interchange fees - commonly called swipe fees - that merchants pay every time a consumer uses a credit card. Proponents argue that lower swipe fees would reduce costs for retailers and, by extension, consumers. But the reality is far more complicated, and the bill’s downstream effects on credit card rewards programs could be severe.

Merchants paid an estimated $172 billion in card processing fees in 2023, according to the Nilson Report. That figure has grown roughly 8% annually over the past five years, outpacing both inflation and retail sales growth. The CCCA would require banks with over $100 billion in assets to enable at least two unaffiliated payment networks on each credit card, breaking the current duopoly between Visa and Mastercard. The logic mirrors what the original Durbin Amendment did for debit cards in 2010 - and the consequences of that earlier legislation offer a clear warning.

What Happened When Debit Card Interchange Fees Were Capped?

The Durbin Amendment, passed as part of the Dodd-Frank Act, capped debit card interchange fees at roughly 24 cents per transaction, down from an average of 44 cents. The Federal Reserve Bank of Richmond found that 98.8% of banks subject to the regulation reported lower interchange revenue within two years. Banks responded predictably: free checking accounts, once standard at most institutions, became rare. A 2014 study by researchers at the University of Pennsylvania’s Wharton School estimated that consumers lost $22 to $25 billion annually in higher banking fees and reduced account benefits following the Durbin Amendment.

The merchant savings were supposed to trickle down. They mostly didn’t. The Federal Reserve Bank of Richmond’s own survey found that only 1.2% of merchants reported lowering prices after the debit interchange cap took effect. Big-box retailers like Walmart and Target absorbed the savings into their margins. Smaller merchants saw little benefit because their payment processors didn’t pass the fee reductions through.

This history matters because the CCCA applies the same framework to credit cards, where interchange fees are significantly higher - typically 1.5% to 3.5% of each transaction. And credit card interchange revenue is precisely what funds the rewards programs that 84% of cardholders say they actively use, according to a 2024 J.D. Power survey.

How Would the CCCA Actually Change Rewards Programs?

Credit card rewards are not charity. They’re funded almost entirely by interchange revenue. When a consumer earns 2% cash back on a purchase, that money comes from the roughly 2.2% interchange fee the merchant paid. Card issuers use a portion to cover fraud costs and operational expenses, and the remainder finances rewards. The math is tight.

If the CCCA forces routing competition that drives interchange fees down to levels comparable to what alternative networks charge - roughly 0.5% to 1.0% based on current PIN debit network rates - the funding mechanism for premium rewards collapses. The American Bankers Association estimates that a 50% reduction in interchange revenue would eliminate approximately $40 billion in annual cardholder benefits, including cash back, travel points, and purchase protections.

Some industry analysts are more conservative. A 2024 analysis from Cornerstone Advisors projected that a 25% to 35% interchange reduction would force issuers to cut rewards earn rates by 30% to 50% on most consumer cards. Premium travel cards like the Chase Sapphire Reserve or American Express Platinum, which already operate on thin issuer margins, would likely see annual fee increases of $100 to $200 or significant reductions in sign-up bonuses and ongoing benefits.

Cards that currently offer 2% flat cash back might drop to 1% or lower. Category bonuses of 3% to 5% at grocery stores or restaurants could disappear entirely. And the sign-up bonuses that attract new cardholders - often worth $500 to $1,000 in points - would shrink dramatically as issuers lose the interchange revenue that justifies those acquisition costs.

Who Actually Benefits From the Bill?

The CCCA’s sponsors frame it as consumer protection. Senator Durbin has stated that swipe fees are a “hidden tax” on every purchase, inflating prices by $900 per household annually. That figure, sourced from the Merchants Payments Coalition, assumes that 100% of interchange fee savings would translate into lower consumer prices. The debit card precedent suggests that assumption is flawed.

Large retailers with significant negotiating power stand to benefit the most. The National Retail Federation has been the bill’s most vocal supporter, spending over $13 million on lobbying efforts related to payment processing regulation since 2022. Amazon, Walmart, and Costco - companies that process billions in annual card transactions - would see immediate cost reductions measured in the hundreds of millions of dollars.

Small businesses, often cited as the primary beneficiaries, might see limited relief. Most small merchants work with third-party payment processors like Square or Stripe, which set their own markup above interchange rates. Even if interchange falls, processor margins may not. A 2023 analysis from the Mercator Advisory Group found that small businesses with under $1 million in annual revenue experienced no measurable fee reduction following the Durbin Amendment’s debit card changes.

Meanwhile, consumers who use rewards cards effectively - disproportionately middle- and upper-income households - face a direct loss. A 2023 Federal Reserve Bank of Boston study found that consumers who use cash and debit cards effectively subsidize those who earn credit card rewards, with a wealth transfer of approximately $1,282 from lower-income to higher-income households annually. The CCCA’s proponents argue this is another reason to reduce interchange. The counterpoint is that eliminating rewards doesn’t redistribute that wealth - it simply transfers it to merchant profits.

Could Networks and Issuers Adapt Without Gutting Rewards?

The credit card industry is not static. When the Durbin Amendment hit debit cards, issuers shifted their business models toward credit products, where interchange was unregulated. If the CCCA passes, issuers will look for new revenue sources - and history suggests consumers won’t like the alternatives.

Higher annual fees are the most obvious adjustment. Cards that currently charge no annual fee might introduce one. Premium cards could push annual fees above $700 or $800. Late fees and interest rate structures could tighten, particularly for subprime borrowers who are least able to absorb higher costs.

There’s also the possibility that Visa and Mastercard would restructure their network fee arrangements. Both companies have already been adjusting their fee schedules in response to a separate $5.54 billion class-action settlement reached in 2024. If forced to compete with alternative networks on price, they might shift costs from interchange to other fee categories - assessments, cross-border fees, or network access fees - that are less visible to consumers but still add up.

American Express operates a different model. Because Amex functions as both network and issuer for most of its cards, the CCCA’s routing requirements may not apply in the same way. This could give Amex a temporary competitive advantage, though legislative language in the 2025 version of the bill appears designed to close that loophole.

What’s the Realistic Timeline and Probability?

The CCCA has failed to pass in two previous congressional sessions. The 2025 reintroduction has gained broader bipartisan support, with co-sponsors from both parties, but faces intense opposition from the banking and payments lobby. Visa, Mastercard, and the major card-issuing banks spent a combined $69 million on lobbying in 2024, according to OpenSecrets data.

Political dynamics complicate the outlook. The bill enjoys support from populist factions in both parties - conservatives who oppose corporate monopolies and progressives who want lower consumer costs. But the financial services industry has deep relationships with both the Senate Banking Committee and the House Financial Services Committee, where the bill would need to pass before reaching the floor.

If the CCCA does pass, implementation would likely take 18 to 24 months based on the timeline the Federal Reserve followed for Durbin Amendment compliance. Card issuers would use that window to restructure their rewards portfolios. Consumers who hold premium rewards cards should monitor issuer communications carefully during any transition period.

The most probable near-term outcome is a compromise. Congress may pass a modified version that caps interchange for the largest merchants while exempting small-business transactions, or that phases in routing requirements over a longer timeline. Such modifications could soften the blow to rewards programs while still delivering some merchant relief.

Regardless of the legislative outcome, the pressure on interchange fees is unlikely to disappear. The credit card rewards ecosystem, built on a foundation of merchant-funded interchange, faces structural challenges that extend beyond any single piece of legislation. Consumers who depend heavily on rewards should begin evaluating which benefits they’d miss most - and which cards offer value through features less dependent on interchange revenue.