A bill in Congress might affect the way credit card rewards are distributed in the future.
Inflation and interest rates continue to rise, and cashing in some of your credit card points may help alleviate the pain.
Drew Darrow in Hanover is an expert at this. “My wife loves it when I buy something and it says $0.” That’s a win in her book, and it’s a win in mine. “A happy wife means a happy life,” he remarked.
He saves roughly $3,000-4,000 each year by taking advantage of points and rebate programs.
“I’ve got a family of five so I’ve got to support them somehow and this really helps offset those expenditures,” he explained.
However, that safety net could soon disappear.
Brian Kelly, founder of The Points Guy, said the proposed Credit Card Competition Act would put your points in jeopardy.
“People may think I’m being dramatic by saying that credit card points and cashback will go away, but we know this is the case,” said Kelly.
Currently, when you use your credit card to make a purchase, around 2% of the transaction goes to the credit card processors and the bank that issued the card. This 2% covers fraud and purchase protection, as well as any advantages you receive, such as points and cash back. According to bipartisan lawmakers, Visa and Mastercard dominate interchange.
Their bill would provide shops a minimum of two networks to utilize for that price, altering competition and the benefits we receive. Supporters of the proposal argue that the act’s purpose is to assist smaller businesses with credit card swipe fees, and that any savings will be passed on to you and me to help with inflation.
We’ve seen similar legislation before, it happened with debit cards back in 2010.
According to The Points Guy, the bill effectively removed debit card incentives and protections. “The Federal Reserve conducted research. Only 2% of retailers passed on part of the cost savings to customers. “98% kept or raised prices,” Kelly explained.
Today, several debit rewards programs are still active. According to financial experts, credit card incentives are significantly more lucrative and easier to obtain.
According to a Finder survey, nearly half of Americans will use a credit card to earn points in 2021.
“Many families can only afford to travel by leveraging their points and cash back, so ripping that away from everyday Americans and padding the pockets of the big box retailers, simply makes no sense,” said Kelly.
As for Darrow, he thinks there could be a compromise for people to keep their points – and boost small businesses.
“You don’t get enough of the small mom-and-pop benefits. I believe if the cards were inclusive of that then maybe this legislation wouldn’t have to happen,” he told FOX43.
There are reports this legislation is set to be voted on by the end of the year.