Conservatives Should Oppose the Credit Card Competition Act on Principle 

The Credit Card Competition Act (CCCA) has picked up a growing list of Republican backers. Its pitch enticingly sounds pro-market: break up the existing “duopoly” in the payments space, inject competition, and lower prices for families.  

But the bill does not create competition. It enables Washington to dictate how private networks route transactions, with the explicit goal of pushing down the fees merchants pay. Modeled on the failed Durbin Amendment experiment, it would deliver the same results. Price controls, whether imposed directly or through a routing mandate, do not eliminate costs. They shift them onto consumers. Conservatives should oppose this bill on principle. 

In a two-sided market, such as card payments, the two main parties involved in a transaction, the cardholder and the merchant, both benefit. The cardholder can spend more than they would carrying cash, and the merchant benefits from higher transaction amounts and a higher frequency of transactions because swiping and tapping a card is more convenient than counting cash. 

Take Atlanta’s Mercedes-Benz Stadium in 2018, for example. It became the first major sports venue in the United States to switch to a fully cashless payment model. The venue saw customer wait times fall by 20 to 30 seconds for food and beverage transactions, all while sales had risen by 16%. If cardholders pay annual fees and interest, it only makes sense that merchants too should pay for the benefits they receive from customer card payments. 

Regulating interchange fees will not save families or consumers money. The failed Durbin Amendment experiment is a clear example. A 2015 study from the Richmond Fed examined the effects of the Durbin Amendment, which capped debit interchange fees. The results spoke volumes about the failures of federal interchange fee regulation. The study estimated that 77.2% of merchants did not change prices post-regulation, about 21.6% of merchants increased prices, and only 1.2% of merchants reduced prices.  

If policymakers care about affordability, they should avoid exporting the Durbin Amendment’s failures onto credit cards. A 2014 study found the number of banks offering free checking accounts “fell by 50% between 2009 and 2013. In comparison, fee-free banking actually increased at banks not subject to the Durbin Amendment.”  

That same study also found that minimum checking account balances roughly tripled between 2009 and 2012, from $250 to $750 on average, as a consequence of the revenue losses from the Durbin Amendment. When policymakers implement price caps, they don’t eliminate costs; they get displaced elsewhere, and more often than not, consumers bear the consequences. 

Many are also unaware that the United States is a global leader in payments technology. EU policymakers lamenting over their lack of homegrown payments systems makes this observation evident. The EU, and much of the world, is highly dependent upon American payment platforms.  

According to the Financial Times, “Visa and Mastercard accounted for almost two-thirds of card transactions in the Eurozone in 2022, according to the European Central Bank, with 13 member countries lacking a national alternative to the US providers. Even where domestic schemes exist, they are declining in use.” 

The root cause of this phenomenon is glaringly obvious for anyone familiar with how markets function. The EU doesn’t allow for viable competitor enterprises to exist because interchange caps limit the profitability needed to sustain major payment platforms. In the EU, credit cards are subject to a 0.3% interchange fee cap, and debit cards are subject to a 0.2% cap. The irony of this rule is that it was intended to ensure competitive pricing. Instead, it destroyed any incentive for new players to enter the market. Free market conservatives in the U.S. should be careful not to replicate the E.U.’s mistake by importing European-style price controls on payment services. 

Conservative lawmakers concerned about affordability should say no to the CCCA and similar bills that make false promises about saving consumers money. These policies merely displace costs from merchants onto consumers and threaten the success of the American payments industry on the global stage.