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Swipe-fee charges—the 1.5%-to-3% “interchange” that merchants pay every time you swipe a rewards card—may feel invisible to travelers, yet they power a major profit engine in commercial aviation.
U.S. banks hand over billions of dollars to airlines in exchange for loyalty miles they can award on co-branded cards, totaling about $25 billion in 2023 and generating 57% of all frequent-flyer miles issued in the U.S.
But airlines warn that a new Senate push to curb credit-card fees could punch a similar-sized hole in their budgets—and in your next free flight.
Key Takeaways
- Airline credit-card partnerships delivered about $25 billion in revenue last year, cushioning carriers during volatile ticket cycles.
- The proposed Credit Card Competition Act (CCCA) aims to slash interchange fees, potentially saving merchants $15 billion a year—but it could also gut loyalty rewards.
- When Congress capped similar debit-card fees in 2011, most debit rewards vanished; a similar pattern could repeat for rewards credit cards, shrinking sign-up bonuses and mile earnings.
The Swipe-Fee Engine Behind Frequent-Flyer Miles
Every time you buy groceries with a SkyMiles-branded AmEx or a Southwest Rapid Rewards Visa, the issuing bank pays what’s called an interchange fee, keeping a slice for itself, and remitting a portion to the airline in the form of bulk miles purchases. For some carriers, those payments can eclipse baggage fees and seat-selection charges combined. Southwest Airlines Co. (LUV), for example, booked $896 million in loyalty revenue in the third quarter of 2024—about 13% of total revenue—largely from its co-brand cards.
Why do banks tolerate such high fees on premium rewards cards? Higher interchange rates enable them to fund splashy $50,000, $75,000, or even $100,000 sign-up bonuses, and ongoing earn rates keep consumers’ spending flowing through their network. Airlines, in turn, enjoy high-margin, capital-light cash: they sell points today but deliver seats later (with many remaining unspent)—often at off-peak times that would have gone empty anyway.
What Washington Wants to Change—And Why Airlines Are Panicking
The 2025 proposed amendment to the CCCA—known as the Durbin-Marshall proposal—would require the largest card-issuing banks to enable at least two competing networks on every credit card. Retailers could opt for the cheaper rail, eroding Visa Inc.’s (V) and Mastercard Inc.’s (MA) pricing power and, by extension, banks’ interchange revenue. Senators Dick Durbin and Roger Marshall say the measure would inject competition and lower swipe fees, echoing the 2010 debit-card cap that merchants credit with saving billions for small businesses.
Companies in the airline industry see it differently. In a 2025 letter, all major U.S. carriers, as well as Airbus SE (EADSY), Boeing Company (BA), and multiple labor unions, argued that trimming these fees would “imperil” loyalty programs that fueled 16 million free domestic flights in 2024 alone and underwrote many orders for new aircraft.
Industry advocates point to the debit-card precedent: when interchange caps hit in 2011, debit rewards all but disappeared, and free checking became scarcer, shifting costs back to consumers. Airlines warn the same playbook will be repeated for credit cards—fewer miles minted, smaller bonuses, and leaner elite-status perks.
How Your Travel Perks Could Shift If Fees Get Capped
If swipe-fee margins shrink, banks will have less headroom to buy miles. Analysts estimate that even a modest cut could wipe out much of the economics that make co-branded cards viable, forcing issuers to trim earn rates or annual-fee waivers.
If it happens, expect sign-up bonuses to fall first—they’re the most discretionary lever. Ongoing everyday spend multipliers could follow, hitting households that rely on card earnings to afford holiday trips.
Airlines might also respond by jacking up the mileage price of awards—already up 12% above inflation since 2019. They could also tilt programs further toward dynamic, revenue-based redemptions that track cash fares. Meanwhile, cash-back cards, which thrive on thinner margins, may look increasingly attractive to consumers frustrated by the shrinking value of mileage points.
Travelers who still prize rewards travel can hedge now:
The Bottom Line
High interchange fees are the hidden fuel that lets airlines shower you with “free” miles and flights. If Congress caps those fees, loyalty economics could shift fast, shrinking bonuses, raising prices, and nudging carriers to rethink how they reward your swipe.
Keep an eye on Capitol Hill and have a backup travel rewards strategy so your next vacation can get off the runway.
