The Hidden Costs of the CCCA
TL;DR
Background: The Credit Card Competition Act of 2026 (CCCA) is marketed as a pro-competition reform aimed at reducing allegedly excessive credit-card “swipe fees.” The bill would require cards issued on Visa and Mastercard networks to carry a second, unaffiliated network and would give merchants control over how transactions are routed. Supporters argue that this would increase routing competition, lower merchant costs, and reduce consumer prices.
But… Credit-card markets already feature strong competition among both networks and card issuers. Networks compete on far more than price, differentiating on quality, security, innovation, and consumer benefits. The CCCA would narrow this competition by forcing networks to compete mainly on interchange fees, weakening rivalry on the dimensions consumers value most. Interchange fees help balance participation among merchants and consumers. Networks and issuers use them to fund rewards, fraud prevention, insurance, and other cardholder benefits. Under the CCCA, large merchants would steer transactions to the lowest-cost networks, sharply cutting interchange revenue and eroding those benefits.
Moreover… Evidence from the United States and abroad shows that capping interchange fees does not lower retail prices. Issuers instead respond by cutting rewards, raising cardholder fees, and narrowing product offerings. While the CCCA would benefit some large merchants, it would do so by reducing consumer choice and weakening competition across the credit-card ecosystem—leaving consumers worse off overall.
KEY TAKEAWAYS
Competition Beyond Fees
Four-party credit-card networks such as Visa and Mastercard compete on much more than price. They differentiate on interchange-fee structures, rewards and benefits, acceptance and reliability, transaction speed, and the strength of fraud prevention and cybersecurity. They also invest in features like tokenization, real-time alerts, zero-liability protections, and digital-wallet integration to make payments safer and easier.
Issuing banks use different network offerings to design cards with distinct mixes of rewards, fees, credit terms, and protections—from no-fee cash-back cards to premium travel cards with insurance and concierge services. The result is strong issuer rivalry and a wide range of options that let consumers choose cards that match their spending habits and risk tolerance.
Routing Away Competition
By shifting routing decisions from issuers and cardholders to merchants, the CCCA would reshape credit-card competition. Merchants would route transactions to the lowest-cost network, regardless of rewards or security. That change would push interchange fees down and strip issuers of the revenue they use to compete.
As revenue falls, issuers would cut benefits. Consumers would feel the effects first, followed quickly by merchants. Less attractive cards mean lower usage, fewer transactions, and reduced spending—especially for everyday purchases that rely on rewards and short-term credit. Instead of strengthening competition, the CCCA would flatten it, reduce consumer choice, and weaken the spending merchants rely on.
The Durbin Backfire
The “Durbin amendment” to the Dodd-Frank Act shows how interchange-fee regulation can backfire. The law capped debit-card interchange fees for banks with more than $10 billion in assets. Supporters claimed merchants would pass the savings on to consumers, but a Federal Reserve Bank of Richmond study found that 98.8% of merchants kept prices the same or raised them after the cap took effect. Banks responded to an estimated $6.5 billion in annual revenue losses by raising checking-account fees and cutting free checking. As a result, up to one million Americans left the banking system.
This outcome reflects a classic “waterbed” effect. In two-sided markets, platforms balance the needs of merchants and consumers. When regulators suppress prices on one side, costs rise on the other. International experience confirms the pattern. In Australia, interchange-fee caps pushed annual card fees up by more than 50% and cut rewards per dollar spent by about half. In the European Union, rewards fell sharply as well.
Hurting Those Who Can Least Afford It
Verisk data show that 77% of U.S. cardholders in households earning under $50,000 have at least one rewards card. For these consumers, cash back and travel points help pay for everyday expenses. By cutting the interchange revenue that funds rewards, the CCCA would push issuers to scale back or eliminate these programs—just as they did with debit cards after the Durbin Amendment.
The result would be a regressive transfer of wealth, hitting lower-income and minority communities hardest and weakening a tool many rely on to manage household budgets.
A Race to the Bottom
By shifting routing choices to merchants, the CCCA would push Visa and Mastercard to compete on lowest cost instead of value. The law would elevate merchants’ demand for lower fees over consumers’ preferences for security, rewards, and reliability.
The pressure would spread beyond four-party networks. Even three-party networks such as American Express and Discover, though not directly covered, would face weaker competition on quality and less incentive to invest in rewards, security, and innovation.
The result would be a race to the bottom across the U.S. card-payments system. Innovation would slow, fraud and theft would increase, and both consumers and merchants would end up worse off.
Hidden Costs for Main Street
Only a small group of large merchants—especially those with in-house fraud systems—would benefit from the CCCA. Most smaller merchants pay a fixed merchant-discount rate and would see little, if any, fee reduction. For many, higher fraud costs would outweigh any modest savings. Small businesses would also face a hidden cost. If lower margins lead issuers to cut back lending, merchants could lose access to as much as $700 billion in revolving credit.
Less Innovation, Less Value
The CCCA would steer America’s innovative credit-card market toward a regulated-utility model and slow the development of new financial products. By disconnecting transaction prices from the value networks provide—such as fraud protection and rewards—the law would weaken issuers’ incentives to compete for cardholders. Consumers would face a less valuable product: higher fees, fewer benefits, and weaker security.
The result would likely be lower consumer welfare. Lost rewards and new banking fees would impose direct costs on households, with little reason to expect offsetting price cuts at the register. Rather than helping consumers, the CCCA would leave them with a payments system that is less efficient, less innovative, and less valuable.
For further analysis, see ICLE’s research on payment systems here.