Would ending credit card rewards actually hurt tourism? SC’s airports are worried

A federal bill could stifle South Carolina’s travel and tourism industry by causing credit card rewards and loyalty programs to be scrapped, according to airport executives throughout the state.

In a letter to U.S. Sens. Lindsay Graham and Tim Scott, directors of each of South Carolina’s six major airports asked the lawmakers to vote against a proposal — the Credit Card Competition Act of 2023 — they say would effectively eliminate the funding for credit card rewards and loyalty programs that many visitors to the Palmetto State rely on.

“Regardless of what brings people (to South Carolina), what remains the same is that tourists open their wallets to airlines to travel here, to hotels to stay, to restaurants to eat and beaches to swim,” the letter said. “The CCCA would sharply reduce the number of people traveling here through our airports.”

The letter was singed by Mike Gula, executive director for Columbia Metropolitan Airport; Connie Anderson, executive director for Florence Regional Airport; Judy Olmstead, director of airports for Myrtle Beach International Airport; David Edwards, president and CEO for Greenville-Spartanburg International Airport; Jon Rembold, airport director, Hilton Head Island Airport; and Elliott Summey, executive director and CEO for Charleston International Airport.

The CCCA is intended to create more competition in the credit card industry by lowering credit card transaction fees for merchants, according to the bill’s sponsor, US. Sen. Dick Durbin, R-Illinois. Each time a customer swipes a credit card, merchants are charged a fee (around 2% to 3%). Visa and Mastercard — who controls 80% of the credit card market share — keeps some of this fee for themselves as a network fee, but most of it is an interchange fee, which is fixed by Visa and Mastercard but paid to the bank that issued the card, according to a document from Durbin’s office.

Banks, in turn, partner with airlines to fund various travel reward and loyalty credit card programs, using interchange funds.

Critics, including airline executives and the Electronic Payments Coalition — a lobbying group for banks, credit unions and payment card networks — say reducing the interchange would necessitate banks eliminating said programs.

Supporters say creating more competition would drive down interchange fees, which would not only benefit businesses, but also consumers, as merchants generally pass along credit card processing fees to customers via higher prices for their products and services or surcharge fees, according to article by LendingTree.

A spokesperson for Graham said the senior senator “hasn’t said anything on this,” and that while the bill was referred to the Senate Banking Committee, the bill has yet to be “marked up,” suggesting that the measure has a ways to go before reaching the U.S. Senate floor.

Scott hasn’t yet responded to The State’s requests for his stance on the issue.

If enacted, the law would amend the Electronic Fund Transfer Act by requiring credit card-issuing banks to offer a minimum of two networks for merchants for electronic credit card transactions. The merchant could process the card through whichever network is cheapest at the time.

In their letter, the airport executives cited data about the number of flights into South Carolina funded through frequent flyer miles.

“Airlines for America, the leading trade organization for major U.S. airlines, estimates that frequent flyer miles earned through airline co-branded credit cards funded air travel trips (for) 172,000 domestic visitors to South Carolina,” the letter said. “These 172,000 visitors supported nearly $260 million in economic activity, 2,095 jobs and over $71 million in payroll.”

Nick Simpson, managing director of communications for the Electronic Payments Coalition said the CCCA would do more than just stifle tourism.

“Reductions in credit card rewards will directly impact tourist-dependent jobs and businesses and have a ripple effect across local economies,” Simpson said. “But there is more at stake than just rewards. The new government mandates the bill puts on the way Americans’ credit cards are processed is a monumental and unexamined experiment that also raises concerns about data security and fraud protection.”