Vegas Tourism Could Be Hurt by Proposed Federal Credit Card Legislation

Article by : Erik Gibbs Oct 16, 2023

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Proposed federal legislation could potentially reduce credit card fees paid by merchants and foster more competition among credit card-issuing financial institutions.

However, it may also impact rewards programs that consumers rely on for travel incentives, such as trips to destinations like Las Vegas, according to analysts.

Credit card networks like Visa and Mastercard typically charge merchants between 2% and 3% per transaction.

A portion of this fee is retained by the credit card network, while another part is taken as an “interchange fee,” fixed by Visa and Mastercard but paid to the issuing bank.

In 2022, these credit card networks and their issuing banks charged merchants a total of $93 billion in credit card fees. When such fees increase, merchants are faced with a “take it or leave it” choice since many businesses depend on credit card sales for survival.

These interchange fees also fund points-based reward programs, including airline miles, hotel credits and cash-back incentives. A reduction in merchant fees could potentially affect the sustainability of these popular rewards programs.

In particular, a world without airline rewards programs could be detrimental to tourism-based economies like Las Vegas. These programs play a vital role in driving tourism, generating economic activity and helping travelers save on expenses.

For instance, in the case of smaller airlines like Spirit, Frontier and Las Vegas-based Allegiant Air, they were excluded from some 15 million domestic trips awarded through credit card points on major carriers.

However, it’s worth noting that not everyone agrees that rewards programs will disappear entirely. Some industry experts believe that current issuer margins on rewards, combined with data from other markets, suggest that credit card rewards are unlikely to vanish completely.

The proposed Credit Card Competition Act of 2023 aims to increase competition among credit card networks by mandating that transactions must be able to be processed on at least two networks.

The mandate also proposed that transactions cannot be restricted to networks owned or solely affiliated with the issuer, considered a national security risk, or have the largest market share.

Should this bill become law, the increased competition might drive down fees, resulting in less revenue for credit card issuers to invest in services like rewards points and fraud prevention.

However, it could also potentially lead to unintended consequences, such as data breaches, as different networks have varying cybersecurity systems.

Nevada’s congressional delegation is closely monitoring the bill, with constituents expressing their opinions and concerns.

While supporters argue that the legislation could reduce costs for consumers and benefit small businesses, opponents are concerned about the impact on popular credit card programs and the potential threat to tourism-based economies.

Ultimately, the fate of the Credit Card Competition Act of 2023 and its impact on rewards programs remains to be seen, and it will continue to be a topic of debate in Congress and among the public.