Threat to credit card rewards growing as states look to regulate
The battle against swipe fees is heating up.
If you've been reading TPG for the past year and a half, you've probably seen our reporting on the Credit Card Competition Act, a bipartisan bill in Congress that aims to limit swipe fees and interchange exchange fees.
The bill would require credit card-issuing banks to offer at least two networks for merchants processing electronic credit card transactions. The bill authors say this would inject more competition into the credit card industry while lowering the interchange or swipe fees merchants pay when shoppers swipe their credit cards.
Card companies charge merchants in exchange for consumers using credit cards at those merchants; businesses ranging from mom-and-pop shops to hotels are charged each time a consumer pays with a credit card.
But the national effort isn't the only threat to the credit card majors. At least three states have introduced bills targeting excessive swipe fees at the state level.
Here's a roundup of all the current state legislation as of July 9.
Illinois
The Illinois state legislature included a provision in its fiscal 2025 budget that would prohibit swipe fees on sales taxes, state excise taxes and gratuities — marking the first state law of its kind.
The Interchange Fee Prohibition Act allows retailers to receive reimbursement for swipe fees paid on taxes and gratuities beginning July 1, 2025. Democratic Governor J. B. Pritzker signed the bill in June.
Senate Majority Whip Dick Durbin, a Democrat from Illinois who has been a key figure in the Senate working to get federal legislation passed to dramatically limit swipe fees, came out strongly in favor of the Illinois legislation.
“The Illinois state legislature took a major step forward in pushing back against the swipe fees that are charged by credit card companies — fees that are nonnegotiable for merchants and that big banks use to pad their already high profits," Durbin said in a statement. “Now the federal government should take a page out of Illinois’ book."
New York
As of Feb. 11, the Credit Card Surcharge Law requires sellers in New York State who apply a credit card surcharge to sales transactions to disclose the total price for consumer credit card transactions, including the surcharge.
Additionally, the law prohibits sellers from charging a final price exceeding the posted price and prohibits sellers from imposing credit card surcharges greater than those charged by the credit card company to the seller for such card use.
The Credit Card Surcharge Law applies regardless of whether the surcharge is a percentage fee or a fixed amount.
Pennsylvania
As of June 27, the Pennsylvania House of Representatives is considering a bill to bar interchange fees on sales tax when merchants accept credit or debit cards for payment.
House Bill 2394 aims to lower credit card swipe fees by eliminating their application to the state sales tax. Similar legislation has been introduced in more than a dozen other states.
“What has happened in Pennsylvania and Illinois would create credit card chaos,” Richard Hunt, executive director of the Electronic Payments Coalition trade group lobbying against the bill, told Politico. “It would be an operational nightmare.”
Bottom line
As of July, proponents have continuously failed to advance the Credit Card Competition Act, most recently via the fiscal year 2024 spending bill. Still, they will no doubt keep trying.
"Similar bills have been introduced — and rejected — in nearly 30 states. These experimental bills have not been tried anywhere else in the world and will upend the payment system in the U.S.," said Nick Simpson, managing director at the Electronic Payments Coalition. "Because this has never been done, it is hard to say how it will exactly impact reward programs. It would most likely not have the same potential to eliminate these programs like the Durbin-Marshall bill would, but it could weaken rewards programs and will certainly result in the loss of convenience and privacy for consumers."
This type of legislation has the potential to severely hit consumers' rewards, so TPG has been campaigning hard against this bill. The proposed national legislation would likely limit consumers' ability to collect (and redeem) points and miles toward travel or earn cash back that can offset some of their everyday spending.
Related reading:
- Capital One-Discover merger: Here's what it means for consumers and the Credit Card Competition Act
- Here are the best credit card welcome offers currently available
- 7 things to understand about credit before applying for a new card
- How to apply for a credit card
- What is APR on a credit card?
- How to check your credit score for free
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- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
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Rewards Rate
| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 3X | Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com. |
| 2X | Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com. |
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You may be eligible for as high as 100,000 Membership Rewards® Points after spending $6,000 in eligible purchases on your new Card in your first 6 months of Membership. Welcome offers vary and you may not be eligible for an offer.As High As 100,000 points. Find Out Your Offer.Annual Fee
$325Recommended Credit
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Why We Chose It
There’s a lot to love about the Amex Gold. It’s a fan favorite thanks to its fantastic bonus-earning rates at restaurants worldwide and at U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus Membership Rewards points on travel. Paired with up to $120 in Uber Cash annually (for U.S. Uber rides or Uber Eats orders, card must be added to Uber app and you can redeem with any Amex card), up to $120 in annual dining statement credits to be used with eligible partners, an up to $84 Dunkin’ credit each year at U.S. Dunkin Donuts and an up to $100 Resy credit annually, there’s no reason that foodies shouldn’t add the Amex Gold to their wallet. These benefits alone are worth more than $400, which offsets the $325 annual fee on the Amex Gold card. Enrollment is required for select benefits. (Partner offer)Pros
- 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
- $100 Resy Credit: Get up to $100 in statement credits each calendar year after you pay with the American Express® Gold Card to dine at U.S. Resy restaurants or make other eligible Resy purchases. That's up to $50 in statement credits semi-annually. Enrollment required.
- $120 Dining Credit: Satisfy your cravings, sweet or savory, with the $120 Dining Credit. Earn up to $10 in statement credits monthly when you pay with the American Express® Gold Card at Grubhub, The Cheesecake Factory, Goldbelly, Wine.com, and Five Guys. Enrollment required.
- Explore over 1,000 upscale hotels worldwide with The Hotel Collection and receive a $100 credit towards eligible charges* with every booking of two nights or more through AmexTravel.com. *Eligible charges vary by property.
- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.