Recent efforts to reduce credit card fees may appear to be well-intentioned, but they run a very real risk of making it harder for millions of Americans to access credit. The recently proposed Credit Card Competition Act (CCCA), the most recent attempt along these lines, would disrupt the existing credit card landscape in ways that could be damaging to consumers, particularly those with lower incomes. Although the bill’s sponsors claim it will lower prices for consumers, there is no evidence of this assertion.
One of the most concerning aspects of the CCCA is its requirement that credit card companies support multiple processing networks for each transaction, mandating that banks offer more than one choice on any credit card they issue. While such a requirement might ostensibly promote competition amongst processor networks, my own research suggests that doing so would effectively increase the rates of credit card fraud.
While consumers in the U.S. are typically indemnified from the impact of nearly all credit card fraud, an increase in fraud would still impact them. When fraud escalates, so does the price of maintaining these networks, and that invariably results in banks taking steps to reduce these costs.
The CCCA may not even deliver the reduced fees that its proponents suggest. Retailers--particularly large ones--could see lower transaction fees due to increased competition among networks, but there is little evidence that retailers will pass along any cost savings to consumers.
The Durbin Amendment imposed fee restrictions on debit card transactions and mandated that debit cards support dual processor networks. However, studies found little evidence that retailers passed along their cost savings to consumers. What’s more, banks curtailed services to less profitable customers, mainly those with low spending levels and low income, as these customers ceased generating profits for banks.
Disrupting the existing network system could also undermine the investments major credit card companies have made in security and technological innovation over the years. Visa and Mastercard spend billions of dollars a year on advanced fraud detection and cybersecurity infrastructure. Their investments in machine learning and AI-driven monitoring systems help secure transactions, especially in an era where fraud is a growing concern. Mandating that these networks allow competing systems onto their platforms--potentially operated by companies that cannot afford to make such investments in fraud prevention--could complicate security protocols and weaken overall fraud prevention capabilities.
Additionally, the CCCA overlooks how competitive pressures are already reshaping the credit card industry, with fintech companies introducing alternatives such as payment apps and ACH-based transfers, which bypass traditional credit card fees altogether. Increased competition does not require legislative intervention, as the industry is already innovating to serve a broader array of customer needs, including secure and low-cost transaction methods. The CCCA’s attempt to mandate increased choice could paradoxically diminish competition and innovation in the long run.
Rather than compelling network providers to enable third-party access, Congress should consider policies that encourage more open market competition. For instance, reducing regulatory barriers for new market entrants would enable smaller companies to create their own secure networks. Instead of pushing established players to accommodate competitors within their networks--a move that could degrade both security and service quality--the focus should be on enabling a dynamic and competitive marketplace for transaction services.
While the CCCA seeks to address valid issues around credit card fees and competition, its approach is misdirected. The proposed changes could lead to increased fraud, reduced access to credit for low-income consumers, and questionable benefits for end-users. Rather than forcing networks to accommodate multiple players, its goal should be to protect consumers while fostering an environment where payment providers can continue to invest in security and efficiency--a balance that the CCCA fails to strike.
