Proposed federal legislation aimed at lowering credit card transaction fees could ultimately harm small businesses and lower-income households, according to a recent Forbes Article.

The Credit Card Competition Act of 2023 would require large financial institutions to use at least two card networks on credit cards to create competition in an industry controlled mainly by Visa-Mastercard, according to a bill summary.

The summary states that Visa and Mastercard control 80% of the U.S. network market. It says every time a Visa or Mastercard is swiped, about 2-3% is deducted from the transaction a merchant receives.

“Overall, a merchant typically ends up receiving $98 or $97 on a $100 sale,” the summary said. “In 2022 alone, Visa, Mastercard, and their card-issuing banks charged merchants a total of $93 billion in credit card fees. These fees are passed on to consumers in the form of higher prices on everything from gas to groceries, and the fees keep going up, most recently in April 2022.”

The legislation, introduced by Sen. Dick Durbin (D-IL), has been supported by numerous small business associations, including the National Federation of Independent Business.

Forbes, however, suggests small businesses likely don’t generate enough business to be able to negotiate a lower rate that would be impactful enough on their bottom line. The article said businesses making $500 million or more in sales would be rewarded with the benefits of the legislation.

The savings rewarded to larger businesses did not flow to the consumer when similar regulations were placed on the debit card industry via the 2010 Dodd-Frank Act.

Instead, banks found another way to gain profit after losing revenue from Dodd-Frank Act regulations, Forbes said. He said this included removing rewards on debit card usage for the average consumer.

Banks also scaled back on issuing debit cards, the article said.

“The fee cap meant that some of the least profitable customers — who tend to be from the lowest income cohort — became unprofitable for them to service,” the article said. “Roughly 1 million customers lost their debit card accounts after the implementation of the Durbin Amendment.”

The article said any regulation on credit card transaction fees would likely result in reduced access to credit for millions of people. It would also minimize small business rewards.

Reduced credit options could hinder Americans already struggling to pay for vehicle repairs. A 2023 survey by Marketwatch found about 36% of 1,000 Americans surveyed would only be able to spend $500 without taking on credit.

Insurance policyholders may pay out of pocket for collision repair if their insurer won’t pay what the shop needs to get the job done or if their policy doesn’t cover certain vehicle parts, components, or OEM procedures. Collision deductibles often range from $500-$1,000.

A 2023 Forbes study also found small businesses tapping into credit options to start and maintain their operations.

“Twenty-nine percent of businesses sought funding via business credit cards in 2022, and 4.67% of respondents reported that they had used business credit cards as their primary source of funding to kick-start their businesses,” Forbes said. “Once businesses were established, 69.3% attempted to acquire a business credit card, with 31.1% successfully approved.”

The Forbes article on the survey listed multiple potential benefits of credit used by small businesses, including boosting the businesses’ credit rating and rewards such as cash-back percentages, travel benefits, and mileage earnings.

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