US Credit Card Bill Could Reshape Travel Rewards, Airline Strategies

Proposed Legislation Targets Credit Card Fees

A new legislative proposal in the United States, known as the Credit Card Competition Act, aims to reduce credit card swipe fees, a move supported by President Trump. The President stated at the Republican midterm convention that cutting these fees would save the average family $1,200 annually.

The bill, endorsed by Illinois Democrat Dick Durbin, would mandate that banks with over $100 billion in assets enable at least two unaffiliated payment networks on their credit cards, including one beyond Visa or Mastercard. This structure would allow merchants to select the lowest-cost network for each transaction. American Express and Discover cards are specifically exempted from these new requirements.

Disputed Consumer Savings and Merchant Gains

While President Trump cited an annual family saving of $1,200, this figure is contested by analysis. Senator Roger Marshall and the National Retail Federation have stated that families currently pay nearly $1,200 annually due to swipe fees embedded in retail prices. However, the National Retail Federation's own estimates project total annual nationwide savings of $15 billion.

If this entire amount were passed on to consumers, it would equate to approximately $174 per family, with the majority expected to benefit businesses. Historically, countries that have regulated interchange fees have not seen a corresponding reduction in retail prices, suggesting merchants may not pass on their savings to shoppers.

Reduced Rewards and Credit Access Concerns

The proposed legislation is anticipated to redirect value from consumers to merchants by altering how payment networks invest. Currently, interchange fees fund credit card rewards programmes and purchase protections. Data from the New York Fed, which examined 550 million card accounts, shows that issuers typically receive 1.82% of purchase volume and allocate 1.57% to rewards.

A reduction in these fees would likely translate to lower rewards, fewer card features, and potentially tighter access to credit, particularly for borrowers with less established credit histories.

The Reserve Bank of Australia, for example, explicitly predicted that its own interchange rules would lead to reduced rewards, fewer card benefits, and higher fees, indicating this is an expected outcome of such regulation.

Implications for Global Travel and Asian Markets

The potential reduction in credit card rewards holds significant implications for the travel industry, affecting air travel volume and affordability.

Major airlines often link profitability and route development to credit card partnerships; for instance, Delta Air Lines has attributed its expansion of Austin flights to its American Express agreement, and Southwest Airlines entered the Hawaii market to provide earning opportunities for its cardmembers.

A substantial cut to rewards could lead to fewer flights and more expensive seats for travellers. While this policy is specific to the United States, its outcomes could offer insights for Asian regulators considering similar payment system reforms.

The Reserve Bank of Australia's experience already demonstrates how such changes can directly impact consumer benefits and the travel ecosystem within the Asia-Pacific region. Asian airlines and payment providers would closely monitor these shifts, potentially influencing their own loyalty programmes and route development strategies.