Could the Trump Administration Bring Back Mileage-Earning Debit Cards — and a Financial Windfall for Airlines?

The Trump Administration has made moves and signals that it wants to repeal all or part of Dodd Frank financial reform.

Airline Weekly (Feb 20, p.10 – subscription only) notes that Wolfe Research believes repealing Dodd Frank financial reform would cost the airline industry $215 million per year in higher debit card fees.

Dodd Frank killed interchange on debit cards. They’re no longer profitable products for banks to offer, and can’t be by law. The Durbin Amendment which is part of Dodd Frank limited debit card interchange payments to banks with over $10 billion in assets to 21 cents plus 0.05% of the transaction amount and one cent for fraud prevention. By law debit card charges must be proportional to cost, they cannot be a profit center.

The profitability of debit cards made checking accounts profitable for banks to offer, without this many banks have required direct deposits and minimum balances to avoid monthly account fees. In other words, transaction fees paid for bank accounts and now consumers do.

The interesting thing about the claim that the airline industry would be hurt by repealing this rule is that the airline industry was probably the most hurt by the rule! That’s because debit cards used to be profitable enough for banks to offer that they incentivized transactions by buying frequent flyer miles. Dodd Frank effectively killed that business.

Debit transaction volume exceeds credit card transaction volume (although doesn’t generate interest charges on unpaid balances). Repealing the law that debit transactions cannot earn profit for big banks would restore the revenue flow that caused banks to compete for the business, and caused them to incentivize transactions. That creates a major market.

Mileage sales to incentivize debit transactions won’t be as large as credit cards — US airlines receive over $7 billion a year from credit card issuers for co-brand credit card deals. But $215 million is chump change.

Revenue in the US airline industry, by the way, exceeded $155 billion in 2016.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. […] Could the Trump Administration Bring Back Mileage-Earning Debit Cards — and a Financial Windfall f… – Trump is showing that he is very focused on repealing most of the regulations and laws passed during the Obama presidency.  This might be a good thing for some, while others will be hurt.  We’ll have to keep watching to understand the overall impact. […]

Comments

  1. Ummm don’t care Gary. Right now, Im more concerned about the trump administration bringing torture, banning whole religions, or maybe good old fashioned nuclear attacks. You know that kind of thing.

    Looks like thats where we are now, even those who lean liberal like yourself are getting to the acceptance stage, and spinning positive on the insanity.

    Dont care about debit cards. Not one tiny bit.

  2. @Dude, the third world in the title is Trump. Writing about his administration.

    Writing about a potential positive of such. One that is complete minutia. Complete BS, while the administration (again…the subject) is attacking the fabric of American life and what it is to be American.

    So…you chill, and don’t patronize me.

  3. @Dude, the third word in the title is Trump. Writing about his administration.

    Writing about a potential positive of such. One that is complete minutia. Complete BS, while the administration (again…the subject) is attacking the fabric of American life and what it is to be American.

    So…you chill, and don’t patronize me.

  4. @Andy the cuck.

    a. this is a travel blog, so stfu.
    b. since you opened the door… the president who spent 8 years attacking all that is American and whose entire ‘change’ ideal was to destroy America was your boy Obama. he did wonders with his race relations- huh? most racist president in US history.
    c. Trump is what he is. But he is also a guy who gets things done and actually loves this country- that’s a nice departure. oh… and he is doing EXACTLY what he said he would do. you lost. America won. deal with it.
    d. and, you might wanna do a little research beyond msnbc, cnn and whatever Soros funded groups and ‘celebrities’ are brainwashing you with. start by reading the koran. what you’ll find is that the only muslims following the koran as written are…. ISIS! granted, all religion is bs to anyone with an IQ over 80, a smidgen of common sense and a 4th grade education- but at lease christianity, etc outgrew its brutal past and left it a few centuries ago. islam is still in the 11th century. FACT. ok… now it’s time for you to call me a racist (note: islam isn’t a race)…

  5. Picking up pennies in front of a steam roller. The pattern is clear, that banksters will be freed to pillage at will. I can’t imagine why anyone thinks this will end any differently than last time we deregulated bankers.

  6. @aby
    Obama attacking America? Obama racist? Huh? Trump loves America (while he’s being blackmailed by Russia). Huh?
    Let’s review. Racism is the belief that one or more “races” are superior to others. So just how does Obama become racist?
    Trump “gets things done.” Huh? He lost the popular vote, has appointed a global warming denialist to head the agency responsible for protecting the environment and appointed a person who is clueless about public education to head that department. Meanwhile the Republican party created ISIS by invading Iraq and now every time I get on a plane I gotta go through the wringer because Cheney & Rumsfeld wanted to invade Iraq. Sweet.

  7. Trump is showing that he is very focused on repealing most of the regulations and laws passed during the Obama presidency. This might be a good thing for some, while others will be hurt. We’ll have to keep watching to understand the overall impact.

  8. Nobody with a decent credit score should ever use debit cards. Credit cards are far safer because the bank bears the inconvenience of fraudulent purchases. You simply call the bank and decline to pay. With a debit card, the money is gone from your account and you have to call the bank and hope they restore funds promptly. Also you have 2 days to dispute debit transactions v. 60 days from statement date with credit cards. Debit cards only make sense for people with bad credit or people who are so feeble they need to use a cash-like system for budgeting. Never used them and don’t miss them.

  9. If this means SunTrust and UFB bring back decent mileage debit cards, then I can cut Simon Mall out of my MS trips… Totally justifies setting progress back 50 years and putting a real-life supervillain in front of The Big Red Button.

  10. Andy where were you during eight years of innocent Muslim families killed as “collateral damage” in drone strikes that were “keeping us safe from terror?” Also, let’s hear your delusional spin on attacking Libya. That is, if you are even aware it occurred.

  11. President Obama attacks America? Anyone who believes that not only drank the Kool aid, they own the company. My hope is that Republicans don’t screw things up so badly we won’t be able to fix them. Trump is a moron who has absolutely no idea what he’s doing.

  12. Trump is doing what he said cutting regulation and that is it.This blogger was pointing this out that is it!
    Why do people bitch and moan if their view is not like there’s? Trump is secretly loved by the middle class public and nothing anyone says or does is going to change that.

  13. @Marie
    I guess some people just don’t like being told to “STFU.”
    Vincente has it right. Picking up pennies before a steamroller, or as I like to say, straining for gnats while the elephants run by.
    Trump secretly loved by the middle class? Then why are his approval ratings at an all time low? Many people are angry because they watched the GOP steal yet another election. So you’d best get used to it the anger as it’s only gonna get worse.

  14. Richard: The popular vote is not how elections are won at this time as you know.If that were the case New York and California would own the United States.
    I have no idea what it would take to change it but i do understand why you would prefer it that way.
    .All i can say is see what happens in 4 years.If i knew you we could place a friendly bet.

  15. @Marie, I’m not talking about the popular vote. GOP voter suppression efforts funded by the Koch brothers cost Clinton huge numbers of votes. This was done via gerrymandering the districts, which are very much based on the popular vote. This is why in the 2014 elections, Dems had far more votes but gained far fewer seats. Why do you think Americans vote on a Tuesday (a working day), rather than a Sunday (a holiday for many). It’s to suppress the vote of poorer people. Similarly the voter ID requirements and the Koch brothers’ Interstate Cross Check programs were designed to suppress minority voters. Here’s a bet I’ll be happy to make. Find me one GOP elected Congressman who will be willing to introduce a bill to move the voting day for national elections to a Saturday or Sunday, or to make it a public holiday. Propose this and you’ll quickly learn what the GOP thinks about “democracy.”

  16. And in the interest of full disclosure, I will say that I never could have brought myself to vote for Hillary, who is nearly as big a crook as resident Trump. And I also believe Obama should be jailed for his drone program, put in the same cell as Bush, Cheney and Rumsfeld.

  17. @Richard – agree with most of what you just said, esp the last post – I think hatred of Hillary got Trump elected much more than any fantasy GOP efforts – and very much agree that voting should be on a weekend. But you lose me with pushback on Voter ID. I need an ID to make a return at TJ Maxx. To buy lottery tix, liquor, fireworks. Apply for a job. Get a library card. Go to the doctor. Use a credit card. ETC… It’s well-nigh impossible to conduct a life without an ID, unless you’re a complete hermit, and in that case, you’re probably not headed out to vote, anyway. I want my vote protected and it only makes sense that you prove you are “you” when you vote.

  18. @Karen – Yes, I think the Dems could have run Bernie or my pet cat and trounced Trump. But their corruption prevented them from winning.

    On the voter ID, the time has come for the US to join much of the rest of the world and adopt a national ID card. The days when you could rightfully say that you don’t want the guv’ment following you are long gone. They follow you whether you want them to, or not (Re: latest Wikileaks data dump). I’ve lived in two countries (Thailand, Hong Kong) where national ID cards have been used for decades. It’s wonderful. I pass immigration in HK in 30 seconds.

    So what is stopping the US from adopting a mandatory national ID card? The GOP. They know the moment that is adopted, they lose 5–10% or more votes in every election. So they push for “selective” ID, where their voters have it (gun license in TX) and the Dems’ voters don’t (student ID in TX). In some states where they passed mandatory voter ID laws they simultaneously shut down many of the offices that might provide said ID, reasoning that GOP voters already have acceptable ID’s, but some Dems don’t. That is what is called voter suppression and that’s what has kept the GOP in power in the face of voter demographics that consistently grow against them. That, and gerrymandering. All IMHO. Feel free to disagree, but that’s what it looks like from my perch in Asia.

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