How your Credit Card Points Could Be Impacted in an Effort to Cut Fees for Consumers

In the credit card industry, VISA and MasterCard are king. For every swipe of your card, a certain percentage is charged to the retailer the purchase was made from. Retailers know how to build this 2-3% charge into their costs, but critics of this system want to change that.

To increase competition between credit card companies, lawmakers want to offer merchants the choice between which company to run their swipe fees through. The hope is that merchants will choose to lower their prices due to the decrease in their overhead, but there is no guarantee they will. In all likelihood, they will be able to pocket the extra money they make from your purchases.

Similar legislation was passed in 2010 in regard to debit cards, called the Durbin Amendment. This gave the federal government the ability to limit interchange fees charged to retailers for debit card processing. Before 2010, debit cards had rewards, but after this piece of legislation all too similar to the credit card competition act, this is no longer the case. Banks and credit unions were not able to take the hit to their business and still offer rewards, ultimately harming the consumer.

With major credit card companies possibly getting a fraction of the business they used to, these points could be on the chopping block. These points require business to be available, and an exponential decrease in business could be the end of rewards millions of Americans use daily.

Up to 47 percent of the nearly 191 million Americans with credit cards say that they use their card solely to rack up on these rewards.

If these rewards ceased to exist, it isn't a far stretch of the imagination to say that these consumers could stop using their cards all together. Should this happen, the impact on the buying power of Americans would be catastrophic.

And for those that would still use their cards, fraud could become more prevalent. Without a funding source— which is the interchange fee retailers pay— credit unions will no longer have the resources to fight fraud as they do today. This could leave the burden of fraud surveillance on the consumer.

Supporters of the credit card competition act say that the impact to points could be minimal, but is it worth the risk?