U.S. Bills Threaten Credit Card Rewards Programs, Says Points Guy Founder

Good morning. Americans have a strong affinity for loyalty points. Nearly three-quarters of them utilize credit cards that enable earning rewards. The revenue derived from issuing these points plays a vital role for numerous Fortune 500 companies, particularly airlines, hotels, and merchants. For instance, Delta Air Lines reported a 6% rise in loyalty revenue last year, with co-brand income from Amex surging 11% to $8.2 billion.

This year, U.S. companies are projected to issue or redeem approximately $26 billion in points for customers. This figure excludes the hundreds of billions of dollars worth of unredeemed points that maintain customer attachment to loyalty programs, even amid devaluations or perks that prove challenging to redeem. Beyond revenue generation, these programs produce valuable data, empowering companies to identify and interact with their top-tier customers. However, this landscape may be on the verge of transformation.

A wave of legislation is emerging that could diminish points and hinder consumers’ capacity to accumulate them. Lawmakers have reintroduced the Credit Card Competition Act, mandating that issuers include two unaffiliated networks on each card. This would enable merchants to select the more cost-effective network during transactions. Additionally, last week, a federal judge upheld an Illinois state law known as the Interchange Fee Prohibition Act, which prohibits swipe fees on taxes and tips. Such measures could result in elevated card fees and curtailed rewards. Several other states are similarly pursuing restrictions on so-called interchange fees.

While these initiatives are designed to reduce costs for merchants and customers, they endanger a type of currency that consumers like myself greatly appreciate. Moreover, they jeopardize the business models of airlines and other enterprises dependent on points systems. To gain insights from an industry insider, I spoke with Brian Kelly, the founder of The Points Guy. Kelly has developed a prominent travel and lifestyle platform that guides users through the world of points, while also serving as a vocal proponent for enhancing the loyalty economy.

“An existential crisis is unfolding in the rewards and credit card sector,” Kelly shared with me last week. “Far too few people grasp the full implications of these proposed laws.”

He makes a compelling point. Should retailers gain the ability to choose transaction networks, they will inevitably opt for those with lower swipe fees compared to the typical 2-3.5% charged by credit cards. For everyday consumers, this shift might translate to reduced points earnings and potentially diminished fraud protections or other benefits funded by those fees. The Illinois prohibition on fees for taxes and tips introduces further complications into the equation.

These legislative proposals are intricate, pursuing a range of objectives. Credit goes to New York for implementing measures that complicate sudden points devaluations without prior notice. Nevertheless, targeting interchange fees also endangers the intricate ecosystems these fees have fostered. Kelly goes further, labeling the developments as un-American: “Are we truly going to let a retailer dictate how a customer uses their own money for a purchase? If retailers prefer debit card usage, they ought to offer incentives for it themselves.” As a result, companies aiming to sustain loyalty among their premium customers might need to innovate beyond dependence on credit-card expenditures to bolster their finances.

The loyalty points ecosystem has become deeply embedded in American consumer behavior and corporate strategy. With billions in play annually, any disruption carries widespread consequences. Airlines like Delta exemplify how loyalty programs have evolved into profit centers, with co-branded partnerships driving substantial growth. Yet, as regulatory pressures mount, the delicate balance between merchant costs, consumer benefits, and issuer revenues faces unprecedented scrutiny.

The Credit Card Competition Act represents a particularly bold intervention. By requiring dual networks on cards, it empowers merchants to route transactions through the least expensive option, potentially slashing the fees that fund rewards. Proponents argue this fosters competition and lowers prices, but critics, including industry experts like Kelly, warn of collateral damage to consumer perks. Similarly, state-level actions like Illinois’s fee ban on taxes and tips could cascade nationwide, prompting issuers to recoup losses through higher annual fees or scaled-back rewards tiers.

Kelly’s perspective underscores a core tension: consumer choice versus regulatory overreach. His platform, The Points Guy, has demystified rewards for millions, highlighting optimal strategies for earning and redeeming points. Now, he sounds the alarm on existential threats, urging greater awareness. “Retailers shouldn’t control payment rails funded by card rewards,” he contends, advocating for market-driven incentives over mandates.

Looking ahead, airlines, hotels, and merchants may adapt by diversifying revenue streams or enhancing direct engagement. Data from loyalty programs remains a goldmine for personalization, but its value could erode if points issuance declines. Positive reforms, such as New York’s anti-devaluation safeguards, show policy can protect consumers without dismantling systems entirely. Ultimately, the debate pits merchant relief against the rewards economy’s vitality, with consumers caught in the middle. As Kelly aptly notes, preserving choice in how Americans spend and earn defines the American way.