When you think of credit card networks, Visa and Mastercard probably come to mind. The first, and perhaps only, brand name to float in. The 2022 Credit Card Competition Act aims to change that.

A bill proposed by US Senate Majority Whip Dick Durbin (D-IL) and US Senator Roger Marshall, M.D. (R-KS) would increase competition within the credit card network market. increase.

Insights into credit card bank rates Networks are different than issuers. Issuers such as Capital One, Chase, and Bank of America offer credit cards. Networks such as Visa and Mastercard facilitate behind-the-scenes elements of transactions, such as securely routing money. American Express and Discover are unique in that they are both a publisher and a network.

Companies pay credit card issuers and networks a fee each time a customer uses a credit card. The interchange (swipe) fee is paid to the credit card issuer, and the network fee is paid to the network. Average credit card processing fees range from 1.5% to 3.5% for each transaction.

The Credit Card Competition Act seeks to bring these fees down by requiring major credit card issuing banks to offer a choice of at least two networks capable of processing electronic credit transactions. Some, including the senators who proposed the legislation, believe that these processing fee cuts will allow businesses to lower the prices of their goods and services and pass the savings on to consumers. This may sound like a win for everyone, but not everyone is convinced. In fact, many business owners are concerned about the ramifications that can affect things like credit card security and rewards.

Small business owner Perspective

To get a small business owner's perspective, we spoke with David Collado, co-owner and CEO of Happy Howie's All Natural Dog Treats, about the proposed legislation. I heard.

You are a longtime Capital One customer.

Yes, I have had 2% Capital One Spark Cash Plus for about 12 years. It's Visa and the cashback is great. This card has evolved with my business.

It also has good fraud protection. If it falls into the wrong hands, Capital One will respond quickly and fix it. They understand our buying patterns. You will receive an email asking if this is me before any unusual transactions are made. it's huge. Having to replace a stolen card is really confusing as it means having to update the number at every business associated with the account.

Since your card uses the Visa network, what is your perception of the company? Are there any options?

Sometimes you don't want competition. As a cardholder, I care most about the best cybersecurity and fraud prevention, and Visa and Mastercard do that. I want a high degree of precision and I don't want to give it away to any company.

I see it like this: The two largest aircraft companies are Boeing and Airbus. They are established and have a strong history. I'm not going to jump on a new aircraft because it's innovative. I am concerned about safety. Being innovative has its good times and its bad times.

Do you think small businesses want the freedom to choose between multiple credit card processing networks?

No, I've heard it before there is not. Visa and Mastercard have long been a part of life. The system is working.

Now back to the scam. If the law is passed, merchants will be able to choose which card network they process transactions with. The company with the lowest rate is not necessarily the safest. Does this matter to you?

Sure. Cybersecurity in financial transactions is taken for granted by many, and maintaining that security comes at a significant cost. But it is very important. There are many sophisticated hackers trying to break into your account. Visa and Mastercard can handle it. The same cannot be said for startups.

Small businesses typically operate on thin margins. Do you think this bill will favor big companies, or all companies equally?

Walmart and Target are big supporters of the bill. , clearly to their advantage. However, small businesses tend to rely on reward programs. The rewards they earn are good for business. The cashback and points you get from billing make a big difference.

How can I maximize my cashback earnings?

Just this week, I purchased a very expensive piece of equipment for my operation. I was considering. I accepted the offer, but after confirming that I could use my credit card, I was able to get the 2% cashback. From small purchases to large purchases, we find every opportunity to use our cards.

What do you want to do with your accumulated rewards?

Early on, I was redeeming a gift card that I used for office supplies. It's about cutting costs. As Happy Howie's grew, they saved cash for equipment purchases. Earned over $20,000 cashback! Over the past six months, we have used our rewards to fight inflation and redeem them for regular expenses so we don't have to raise our prices.

Final Thoughts on the Proposed Credit Card Competition Law?

Not suitable for small businesses. The politicians behind the bill would do better to teach owners how to use their credit cards.

Small Business Advocates Concern Over Credit Card Competition Laws

Others share Corrado's dubious outlook. Raymond, chief economist at the Small Business & Entrepreneurship Council J. Keating is concerned about the implications for a wide range of business owners, especially security.

“SMEs are more vulnerable to fraud protection for themselves and their customers, such as fraud monitoring and prevention, development of new anti-fraud technologies, and continued maintenance and improvement of the U.S. electronic payment system infrastructure.” We face risks.”

There are other potential downsides to changing the dynamics of credit card networks, says Keating. Less money in banks can mean less money to lend to small businesses. It may hinder future innovation and technology development.

And then there are the unknown costs of setting up and maintaining interoperability (the ability of different systems, devices, applications, or products to connect and communicate in a cooperative way).

He said, “Governments have fundamental obligations that they must undertake to enable free enterprise to thrive.” Keating. “Such efforts include establishing the rule of law through sound legal and court systems, protecting property rights, and enforcing contracts. But that is not the case here.”