The Credit Card Competition Act of 2023 is pitting retailers against banks. Proponents say it’ll benefit merchants by lowering some of their operating costs, enabling them to reduce prices. Opponents say that not only are merchants likely to keep those savings to themselves, but credit card companies also may end up slashing the rewards they offer to make up for the revenue they’ll lose.

For now, this is all still speculation. Also up in the air is when this legislation might move forward in Congress. “Your guess is as good as mine,” says Stephanie Martz, chief administrative officer and general counsel of the National Retail Federation, an organization in favor of the Credit Card Competition Act.

Should the Credit Card Competition Act pass, consumers may notice some changes.

To understand the Credit Card Competition Act, it helps to first understand what happens when you use a credit card to make a purchase. The card issuer, a bank or credit union, actually makes the payment for you, and you later repay the issuer when you pay your credit card bill.

Issuers don’t pay merchants directly, however. Payment networks like Visa, Mastercard, American Express and Discover work as the intermediary, sending purchase information back and forth between the merchant and the card issuer. Payment networks charge merchants interchange fees, also known as “swipe fees,” to do this, and those fees, in part, go toward funding the rewards that your credit card earns.

And here’s where much of the conflict lies. Under the current system, if a merchant accepts credit cards, it is “locked in” to whatever payment network that credit card runs on (the payment network logo that is displayed on the card) — and thus the merchant must pay whatever fee that network charges.

Among payment networks, Visa and Mastercard are the biggest players by far. The Credit Card Competition Act is a bipartisan bill that, according to its backers, is intended to break up what they view as a Visa-Mastercard duopoly. It would require large banks to allow more choice in terms of what payment network can be used for processing transactions that involve their credit cards. So if, for example, a shopper used a Visa card to make a purchase, the merchant could choose Visa as the payment network to process the transaction, or it could opt for another (and possibly less expensive) network.

Supporters of the measure hope that adding this element of competition would bring down interchange fee rates, saving merchants money and allowing those merchants to, in theory, pass along those savings to their customers.

But not everyone agrees that the bill would be a win for consumers.

If the Credit Card Competition Act passes, there will be no change in how you use your credit cards to make purchases in stores or online. However, experts speculate that consumers could be affected in other ways.

Supporters of the Credit Card Competition Act cite lower operating costs for retailers as a main benefit, especially small businesses like your neighborhood corner store.

“Swipe fees are the second-highest operating cost, on average, for these businesses. Only labor is a higher cost,” says Doug Kantor, general counsel of the National Association of Convenience Stores. “A big piece of that is that the fees automatically rise with inflation. As we see inflation in the economy, merchants’ costs go up. Convenience store owners are left chasing their tails to try to maintain some profitability with these rapidly rising fees.”

Supporters say lower swipe fees for retailers could get passed down to consumers in the form of reduced, or at least stable, prices. They say consumers could also benefit if retailers opt to reinvest in themselves by hiring more employees, expanding their product offerings and opening additional store locations. Prices may not go down in those cases, but the customer experience could improve.

But the Credit Card Competition Act doesn’t require merchants to pass along the savings, so opponents aren’t convinced it will happen at a large scale. “I frankly sit on the devil’s advocate side, and I don’t see that happening,” says Matt Garfield, managing director within the retail and consumer products practice at FTI Consulting, a business advisory firm.

Garfield anticipates that small merchants will use the savings from lower swipe fees to keep prices stable, increase their cash cushion or put toward business improvements.

If you’re a committed credit card rewards optimizer sitting on a pile of points and miles, the possibility that the Credit Card Competition Act would pass is likely making you sweat. A major concern is that with reduced income from swipe fees, credit card issuers will cut back on their rewards programs and partnerships with airline loyalty programs.

This could result in consumers carrying fewer credit cards, since card offers might be less appealing, and taking fewer leisure trips, since their spending may not earn as many miles, Garfield says. “Credit cards will have to continue to think about how they drive loyalty among their customer base.”

If the Credit Card Competition Act were to pass, an increase in other non-points-centric perks — like airport lounge access and easier paths to status with airlines — could be one way for credit card issuers to continue to entice consumers, according to Garfield.

Plus, the process of accommodating additional payment networks is more complex, compliance-wise, which also comes at a cost for banks, according to Brock Kannan, an adjunct professor at Wake Forest University School of Law who teaches banking law and regulation. To offset such costs, credit card issuers might have to increase other fees or alter their rewards programs in some way, Kannan says.

The loss in interchange revenue could make banks and credit unions more risk-averse in their lending practices, says Jason Stverak, deputy chief advocacy officer for the Credit Union National Association. “Primarily, our major concern for credit unions is the loss of access to credit for many individuals in this country.”

Opponents also express concerns about security risks to consumers posed by adding additional payment network options. The Credit Card Competition Act does instruct the Federal Reserve to identify card networks that are a national security risk or are operated by foreign state entities. Those networks will not be available options.

In terms of credit access, as a consumer you don’t have much sway when it comes to banks’ risk management decisions. But you can take steps to establish credit or boost your eligibility for credit cards or other loans, such as using secured credit cards or becoming an authorized user on someone else’s account.