Credit card networks like Visa or Mastercard typically charge merchants between 2% and 3% per transaction. Some of that money is kept by the credit card network and some is taken as an “interchange fee,” which is fixed by Visa and Mastercard but paid to the bank that issued the card, according to the office of Sen. Dick Durbin, D-Ill., a sponsor of the Credit Card Competition Act of 2023.

In 2022, Durbin’s office said, Visa, Mastercard and their card-issuing banks charged merchants a total of $93 billion in credit card fees. When those fees are raised, most recently in April 2022, merchants either have to accept the increase or stop accepting credit card payments. Durbin calls it a “take it or leave it” choice for merchants whose businesses generally can’t survive without credit card sales.

But interchange fees also bankroll points-based reward programs such as airline miles, hotel credits and cash-back incentives, said Richard Hunt, executive chair of the Electronic Payments Coalition.

Hunt, whose trade group includes major credit card companies and banks, said it’s possible a cut in merchant fees could result in the demise of popular rewards programs.

A world without airline rewards programs would be especially harmful to tourism-based economies like Las Vegas, said Josh Saltzman, vice president of global government affairs at Airlines for America, which lobbies for major airlines.

Some 15 million domestic trips were awarded through credit card points on major carriers — meaning smaller airlines like Spirit, Frontier and Las Vegas-based Allegiant Air were not included, according to an Airlines for America analysis. Airline credit cards accounted for $23 billion in economic activity, according to the analysis.

“For a state like Nevada, where travel and tourism is such a big component of the economy, I think the story writes itself,” Saltzman said. “It’s very clear what the impact is.”

Last year, 808,863 people flew to Nevada using airline credit card points, creating a total economic impact of about $1.2 billion, according to the analysis.

Travel credit cards are especially popular because many rewards programs have shifted toward total dollars spent on the card rather than just miles traveled through the airline, Hunt and Saltzman said.

“Every time you’re shopping, you’re getting closer to a free flight,” Saltzman said. “You get to go home for Thanksgiving. You get to the big game that you wanted to see. And it’s really important to people’s lives to be able to utilize that card.”

But CMSPI, an advisory firm for the financial industry, says it doesn’t see rewards programs going away anytime soon.

“Credit card rewards are unlikely to disappear based on current issuer margins on rewards,” as well as data from other markets, the firm said.

At most, a reduction in interchange revenue might result in a small decrease in rewards programs, CMPSI said.

Dylan Jeon, vice president of legal affairs for the National Retail Federation, said nothing in the proposed bill specifically mentions rewards programs.

“At the end of the day, these programs aren’t regulated by any agency or anything like that,” he said. “It’s totally at the control and discretion of the banks or the airline that manages them.”

The National Retail Federation is among supporters of the Credit Card Competition Act of 2023, which would prohibit credit card issuers with assets of more than $100 billion from restricting the number of networks for processing electronic transactions.

The bill — introduced in the Senate in June with a companion bill introduced in the House — mandates that transactions must be able to be processed on at least two networks and cannot be restricted to networks owned or solely affiliated with the issuer, considered a national security risk, or have the largest market share of the credit cards issued.

Durbin said Visa and Mastercard control most of the credit card network market, covering more than 450 million cards nationwide.

Durbin has argued that transaction fees are largely kept in check by market forces, but Visa and Mastercard have structured their networks to avoid market pressures on their fee structures.

The so-called Visa-Mastercard duopoly make it so the banks that receive interchange fees don’t have to compete on those rates, and when a consumer presents a Visa or Mastercard credit card, the seller has to accept it no matter the transaction fee or lose access to all cards issued on the Visa or Mastercard networks.

“These agreements and these relationships (between networks and banks) have allowed them to set the prices charged by the banks,” Jeon said. “It’s worked out well for all parties except the merchants.”

That, however, is a mischaracterization of all the services provided by credit networks with that transaction fee, Hunt said.

“I think the credit card system has worked very well in this country, both from a convenience standpoint and a reward standpoint,” he said.

Hunt noted that the average interchange rate has increased by just 0.01% since 2014.

Should the bill be signed into law, increased competition would likely drive down fees, giving credit card issuers less revenue to invest in services like rewards points and fraud prevention and cybersecurity for cardholders,Hunt said.

Because different networks have different cybersecurity systems in place, requiring multiple networks on a single card could lead to the unintended consequence of data breaches, Hunt said.

“Our banks, and Visa and Mastercard, spend billions of dollars each and every year keeping the bad guys out,” Hunt said. “(A network) cannot protect its card against another rail system. That’s where the problem comes into play. And we know that when people lose the safety and security of their card, the reputation of every bank will suffer.”

The bill does not place any restriction on networks with smaller market share such as American Express or Discover, networks equipped with robust security and fraud prevention infrastructure, Jeon said. Those are the companies, along with other smaller networks, that could benefit the most from the legislation, he said.

“No bank is going to enable a network that they themselves don’t find secure,” Jeon said.

Members of Nevada’s congressional delegation declined to signal how they would vote on the bill. But the legislation is receiving a lot of attention from constituents.

One congressional aide said their office has received nearly 1,000 calls and emails from constituents on the issue.

“That’s very high,” said the aide, who did not want to be identified. Even some of the most polarizing bills in Congress don’t see that level of constituent outreach, they said.

Last month, Nevada Lt. Gov. Stavros Anthony wrote in an op-ed for the Nevada Current that the proposed bill would be a boon to Nevada’s economy.

Anthony urged Nevada lawmakers to vote in favor of the legislation, saying it would save families upwards of $1,000 a year in lower prices of goods and benefit small businesses.

A spokesperson for Sen. Catherine Cortez Masto, D-Nev., said the senator wanted to ensure any legislation “balances the needs of consumers, retailers, and financial institutions.”

Sen. Jacky Rosen, D-Nev., is reviewing the legislation but “shares concerns that it could threaten many of the popular credit card programs that people across the country use to visit destinations like Las Vegas and support Nevada’s economy,” according to a statement from her office.

Rep. Steven Horsford, D-Nev., sits on the House Financial Services Committee, where the House version of the bill is being considered. He said he’s been closely monitoring the legislation.

“I have discussed the legislation with constituents, consumer advocates and the financial sector,” Horsford said in a statement. “I am working every day to decrease costs for everyday Nevadans, but (I) also value the economic impact credit card rewards programs have on our local economy. I will continue to engage with relevant groups on this legislation, especially if the bill has any progress in the legislative process.”

Rep. Dina Titus, D-Nev., whose district includes the Las Vegas Strip, said she, too, has been monitoring the bill.

Titus said the data security and travel rewards aspects of the bill were “particularly concerning for Southern Nevada.”

“Travel incentives like point systems associated with credit card use are especially important for global tourism hubs like Las Vegas as we continue our post-pandemic economic comeback,” she said.

“Southern Nevadans would benefit from legislation that strengthens consumer privacy and bolsters tourism instead of weakening them,” she said.