Congressional proposals threaten to eliminate billions of dollars in cash back and other credit card rewards programs ahead of summer holiday and travel season
WASHINGTON, DC – As the 2023 summer travel season kicks off this week, an estimated $17 billion in consumer credit card rewards are at risk, according to data compiled by the Electronic Payments Coalition (EPC).
“Average American families who use credit card rewards to help pay for summer travel expenses, backyard barbecues, and childcare will feel the pain of proposed credit card routing mandates most acutely,” said EPC board chairman Jeff Tassey.
According to a Wall Street Journal report, six of the top credit card issuers spent $68 billion in credit card rewards programs in 2022, which totals approximately $17 billion during summer months. If enacted, credit card routing mandates would undercut credit card rewards, like cash back, which serves as an important source of savings for 71% of Americans.
The impact on credit card rewards comes as Congress weighs legislation that would allow big-box retailers to create new mandates for processing credit card transactions resulting in a host of unintended consequences for consumers, including eliminating the funding that goes toward valued credit card rewards programs, the weakening of cybersecurity protections, and reducing access to credit. The effort is led by big-box retailers including Walmart and Target.
Credit Cards a Boon for Retailers’ Summer Sales
According to the census Bureau, in 2022, U.S. consumers spent $2.40 trillion in retail purchases during summer months. Compared to cash transactions, credit card transactions would have saved merchants and retailers approximately $165.8 billion in transaction costs.
Research shows that cash transactions come with hidden costs for merchants and retailers. The average cost of cash is about 9.1% of the average transaction value. These costs include the time spent manually counting cash, the cost of theft protection, and the cost of longer lines at checkout, which scares away repeat customers. In 2022, the average cost of accepting credit cards was 2.19% per transaction, far lower than the aforementioned 9.1%.
“Credit card rewards are a critical lifeline for American consumers looking for some additional savings during summer months, particularly those with low incomes or less-than-perfect credit scores,” said Jeff Tassey. “Efforts to limit or eliminate these programs would be a disservice to those who rely on them to make ends meet. Big-box retailers continuously criticize rewards programs when, in reality, the benefits outweigh the costs through increased sales, lower costs, faster transactions, and prompt and guaranteed payments.”