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COMMENTARY: Coming for your rewards

After seeing our hotels, bars and casinos shuttered due to the pandemic, Nevada’s economy is making a major comeback. The Silver State currently boasts the sixth-fastest growing economy nationwide.

The tourists coming to visit are also getting lucky. For the 84 percent of credit card holders who choose a rewards program, a special extra gift comes soon after they’ve booked a stay at Caesars Palace or bought tickets to see U2 at the Sphere: perks such as airline miles, hotel points and cash back.

Those rewards programs — which pay out some $67.9 billion annually — aren’t only a boon to people’s wallets. They’re an important part of the local economy. More than 800,000 tourists use credit card points to travel to Nevada each year, directly supporting nearly 9,000 jobs and a statewide economic impact of more than $1 billion. Nevadans hit the jackpot with credit card rewards programs.

Unfortunately, some Washington lawmakers are pushing legislation that would make credit card rewards programs a thing of the past.

Sen. Dick Durbin, D-Ill., has proposed the Credit Card Competition Act. It would sharply cut the fees retailers pay to process credit card purchases. But those fees are exactly the source of funding for rewards programs. Big-box retailers would pocket billions in savings while ordinary Americans lose their reward flights, hotel nights and cash back.

We know this would happen, because it’s happened before. In 2010, Congress enacted legislation that slashed the processing fees retailers pay on purchases made with debit cards. That essentially marked the end of debit card rewards programs.

At the time, we were promised that the retail giants would pass their savings on to customers. But they didn’t.

According to a 2015 survey from the Federal Reserve Bank of Richmond, just 1.2 percent of retailers reported reducing prices after the law passed. Most stores pocketed the savings for themselves, and more than 20 percent actually raised prices. A 2019 study from the University of Pennsylvania Carey Law School flatly concluded the new law “overall had zero impact on consumer welfare.” But it did put $106 billion into big-box stores’ coffers.

Congress didn’t just stick it to big credit card spenders. Banks had to make up for the lost processing fees. They did so by hiking charges on checking accounts and raising minimum-balance requirements, thereby pricing lower-income earners out of the market. The number of free checking accounts decreased by 40 percent nationwide.

If Sen. Durbin’s bill becomes law, credit cards will likewise become unaffordable for those on the lower rungs of the economic ladder — even though credit cards remain one of the best ways for young families to build the credit scores they’ll need to buy their first home.

Regulators should be wary. The U.S. Department of Transportation and Consumer Financial Protection Bureau just recently hosted a roundtable to learn more about challenges facing consumers with their airline credit card rewards programs. Let’s hope they’ll come to see the biggest challenge consumers are facing is the potential elimination of these popular programs if this bill were to become law.

Consider a simple question: If you were to buy the family a $1,000 TV for the living room this year, would you rather get $30 back or give that as a present to your retailer?

If you said “give it to the retailer,” you’ll love the Credit Card Competition Act. But in all likelihood, you didn’t say that.

Nevadans should urge our representatives in Congress not to sabotage the credit card rewards programs that our wallets — and economy — depend on.

John Moore is a former member of the Nevada Assembly. The retired U.S. Army Ranger is now a small-business owner based in Las Vegas.

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