Picture this: You’re about to board a flight, one you didn’t pay for. It’s all thanks to those credit card miles you’ve been diligently racking up. Each gas station stop, grocery run, and online purchase has been working toward this moment—a little reward for doing what you’d do anyway. Maybe it’s a weekend getaway, or perhaps you’ve upgraded to first class for the first time in your life. Either way, you’re living the dream.
But now, that dream is under threat. And the culprit isn’t some greedy corporation or an out-of-control bank—it’s the lawmakers claiming to have your best interests at heart.
The Interchange Fee: A Tiny Detail with Big Consequences
If you’ve ever wondered what keeps the credit card system running, here’s a quick explainer: When you swipe your card, the business you’re buying from pays a small fee called an interchange fee to the credit card company. This fee—generally between 2-3%—covers everything from transaction processing to fraud protection, and yes, funds the rewards programs you love.
It’s important to note that this isn’t a fee charged by the government. It is not a tax. But it is the cost of business to process the credit card transaction.
Now, some lawmakers have decided these interchange fees are too high. They want to cap them, claiming that it will help small businesses. And while that might sound like a win, it’s worth asking what that cap would really mean—not just for businesses, but for you, the taxpayer and the consumer. (Some state senators and representatives ironically have even tried to ban these fees from sales taxes instead of just voting to reduce sales taxes themselves.)
Because here’s the truth: the cost of capping interchange fees isn’t going to fall on the banks or the businesses. It’s going to land squarely on you. And the first thing to go? Those rewards you’ve been counting on.
What Happens When the Government Caps Fees?
In countries where similar fee caps and price controls have been introduced—places like Australia and the European Union—consumers saw their rewards programs slashed almost immediately. In America, we saw this as debit cards were banned from charging interchange fees. Those benefits evaporated. Cash-back percentages were reduced, points were harder to earn, and airline miles? Well, those became a lot more scarce.
That free flight you’ve been saving for? Gone. The cash-back you get on groceries or gas? Cut in half, if you’re lucky. And don’t expect your annual fee to stay the same—because with fewer rewards to offer, credit card companies will look for other ways to make up the difference.
We’ve seen this story before, and it’s not hard to predict how it ends. Lower interchange fees mean fewer benefits for cardholders. The math is simple: when companies have less revenue coming in, they have to cut back somewhere. And if history is any guide, they’ll start by scaling back the perks that make credit cards worth having in the first place.
The Rewards Aren’t Just for High-Flyers
You might be thinking, “But I’m not someone who flies a lot or spends extravagantly. Does this really affect me?” The answer is yes. Whether you’re using your card for a trip to Hawaii or just to get a few extra bucks back at the grocery store, your credit card rewards are funded by interchange fees. That’s true for everyone from frequent flyers to occasional shoppers.
Interchange fees create value—not just for businesses, but for consumers. They make it possible for banks to offer things like no-annual-fee cards, introductory rewards, and the benefits we’ve all come to expect from modern credit cards. If those fees are capped, the system has less flexibility to offer those perks, and we all lose out.
This isn’t just about miles and points; it’s about the everyday benefits that make credit cards work for you. Cash-back on groceries, zero-percent APR offers, and rewards programs that help families save are all at risk. And for what? A few cents on each transaction, which may not even result in lower prices at the register.
Let’s Not Fix What Isn’t Broken
It’s tempting to view any effort to cap fees as a win for consumers and small businesses. But as taxpayers, we should be wary of government interventions that promise short-term savings at the expense of long-term value. The market for credit cards isn’t broken. Consumers have options, businesses have negotiating power, and competition between banks ensures that the system works.
And let’s not forget—those interchange fees help protect consumers in ways that go beyond rewards. They fund fraud protection, maintain secure networks, and keep the cost of financial transactions low for everyone. Cutting them back risks unraveling a system that, for all its flaws, works remarkably well in the real world.
The Real Cost of Interference
The truth is, most businesses have already adapted to interchange fees. They’ve factored them into their pricing models, and while no one loves paying them, they’re a part of the cost of doing business in a system that benefits everyone. In fact, many small businesses themselves operate using rewards that help them make their dollars go further. That’s why many business groups and taxpayers ought to be wary of this latest government push.
What’s more, there’s no guarantee that capping these fees will result in lower prices for consumers.
So who benefits from capping interchange fees? It’s certainly not you, the credit card holder. The ones who end up paying the price for this well-intentioned government meddling are the very people lawmakers claim to be protecting—consumers who’ve come to rely on credit card rewards as a way to make everyday expenses a little more manageable.
Keep Your Hands Off My Miles
At the end of the day, this is about more than just a few percentage points on a transaction fee. It’s about choice, flexibility, and keeping the things that make credit cards valuable to you and the businesses that rely on them to collect payments for their goods and services. If we let the government start capping interchange fees, we risk losing a system that’s been working quietly in the background, rewarding you for the purchases you were going to make anyway.
So next time you book a flight with miles or cash in on some cash-back rewards, remember: those perks aren’t a gift from the bank— they’re something you’ve earned. And if we’re not careful, the government might just take them away.