Airlines do not just sell seats. They sell miles to banks, and the money from that sale props up the rewards you use for free trips. The engine behind it is simple. Every time you tap a co-branded card, the merchant pays a swipe charge called an interchange fee. The issuing bank uses a slice of that revenue to buy miles from an airline, then drops those miles into your account. That is why airlines quietly root for a world with richer swipe economics. When fees stay chunky, the loop keeps spinning. When fees fall, the math gets tight, and rewards usually get stingier. If you live on sign-up bonuses and sweet spot redemptions, you should understand the gears that make your “free” travel possible. Interchange fees are the largest piece of what merchants pay to accept Visa and Mastercard transactions, and they help fund fraud protection, credit risk, and, yes, credit card rewards.
Here is the uncomfortable truth. For big U.S. carriers, loyalty has become a business line with real scale, not a cute marketing perk. Airlines sell billions of dollars’ worth of miles to banks each year. Delta has publicly targeted around ten billion dollars a year from its American Express relationship by the latter part of this decade. American disclosed multi-billion-dollar cash payments from co-branded credit card and other partners in just the first half of 2024, a figure that swelled further for the full year. United reports several billions annually tied to its MileagePlus ecosystem and bank partners. This is not side income. It is a safety net that smoothed the pandemic and still cushions earnings today.
If you ever wondered why your favorite airline emails you about limited-time 100,000-mile offers, this is the reason. Co-branded cards are a pipeline for loyalty currency that most members now earn on the ground, not in the sky. A 2024 industry study found that a majority of miles in a large European program were accrued through non-airline partners, dominated by cards. U.S. coverage shows a similar pattern, with news analyses estimating that well over half of miles are minted via spending rather than flying. The takeaway is simple. The card swipe, not the boarding pass, is the main mint for points.
So what happens if those fees get squeezed. In the United States, lawmakers keep floating versions of the Credit Card Competition Act. The goal is to push networks and banks to route transactions over more than one network and dial down swipe costs. Retailers cheer the idea. Airlines do not. This summer, carriers and planemakers warned Congress that a crackdown could undercut the funding model for rewards cards and shrink or end some programs. You can guess why. If banks earn less per swipe, they have less room to buy miles or front big bonuses. The politics will keep shifting, but the signal is clear. When fees fall, rewards usually do not get richer.
There is also a live legal track outside Congress. Visa and Mastercard agreed in 2024 to a settlement that would trim average interchange on many U.S. credit transactions by a few basis points and expand merchant steering rights. The cut is small, but the direction matters. Over time, more steering and slightly lower fees chip away at the reward budget that banks can justify. If you notice more cash-discount pricing at the counter, that is part of the same trend. Less revenue in the swipe stack puts pressure on mile prices and perk budgets.
If you want a preview of life under lower-fee regimes, look at other markets. The European Union capped most consumer credit card interchange at 0.3 percent and debit at 0.2 percent, then tracked the results. Regulators concluded the caps reduced fees and merchant charges, with benefits to consumers in the form of lower prices or better services, but several studies and industry analyses documented leaner card rewards and higher borrowing costs in the aftermath. The model survived, but the gravy thinned. In other words, the total pie did not disappear, it just got sliced differently.
Australia is heading down a similar road. The Reserve Bank of Australia already limits interchange and is consulting on fresh changes that could push caps lower and tighten the rules around surcharges. Australian coverage has flagged the likely fallout for frequent flyer earn rates and sign-up bonuses if banks cannot subsidize miles with swipe revenue as easily as before. For travelers in that region, the points game could feel more like a cashback game over time, with narrower sweet spots and more revenue-based pricing.
When you connect those dots, the airline stance makes sense. Legacy carriers want high interchange because it props up their most profitable side hustle. Selling miles to banks has doubled for some programs in recent years and now rivals, even outgrows, the money made on checked bags or change fees. The Economist put it bluntly this month. Loyalty programs are keeping U.S. airlines aloft. If the funding leg under those programs wobbles, expect the airlines to adjust fast to protect margin, which rarely means more generosity for the average cardholder.
So what would “elimination” of high credit card fees look like for your free travel. First, do not expect rewards to vanish overnight. Banks still need sticky products, and airlines still need filled planes. What changes is the generosity curve. Big sign-up bonuses could shrink, minimum-spend hurdles could rise, and category multipliers could get trimmed. Lounge access rules might tighten again because those perks are expensive. Dynamic award pricing would likely creep upward since it is the easiest lever to pull without rewriting card contracts. You have seen versions of this before when programs quietly raised award costs or added peak calendars during periods of higher funding strain. The playbook does not change much, it just runs more often.
Second, programs may tilt even harder toward high-spend cardholders who juice the economics. If interchange gets squeezed, banks will prefer customers with bigger baskets and lower risk. Think premium cards with higher annual fees and heavier lifestyle perks, angled at travelers who can justify them. The rest of the market could see flatter earn rates and lower caps on monthly accrual. It sounds harsh, but it lines up with how programs optimized during past turbulence, and with how carriers have messaged “loyalty equals spend” in recent revamps.
Third, network mix starts to matter. If regulators force more routing competition on dual-network cards, proprietary networks and charge products that sit outside those rules may gain relative leverage. You may already see this when an issuer leans into its own ecosystem benefits instead of raw earn rates. From a traveler’s point of view, that means the real value migrates to systems where the bank can defend more economics, and away from cards that face the most routing pressure.
Fourth, merchants will experiment with steering and price differentiation. The 2024 settlement movement in the U.S. opened more space for stores to nudge you toward lower-fee payment types, and that behavior tends to spread once it becomes normal. If gas stations and small merchants post cash or debit prices, the quiet subsidy that has historically funded rewards gets chipped away. The gap may be pennies on a single transaction, yet across millions of swipes it adds up to fewer dollars available to buy miles.
If you are reading this and thinking about your next trip, here is a practical way to adapt without turning into a spreadsheet goblin. Start by checking where your points actually come from. Pull the last three months of card statements and tag how much spend hits your top co-brand. If most of your miles are from everyday spend, not flights, then your rewards exposure is tied to fee policy, not route maps. In a lower-fee world, you protect value by reducing program concentration. Diversify across a transferable-points card and one co-brand you use often, so you are not stuck if a single program devalues. If you already hold transferable points, learn one partner booking path that consistently beats cash prices on your favorite route. The skill has more value when earn rates dip, because you are squeezing more from each point.
Next, be realistic about timing. Programs change earn and burn faster than most people redeem. If you stockpile, you carry devaluation risk. That was always true, but it matters more when the funding side faces pressure. Earn with intent, redeem with speed, and keep balances low unless you have a near-term plan for a specific award. It is not bearish, it is just how the game works when your points budget depends on a policy fight you do not control. The idea that miles are a store of value is the trap. In practice, they are a perishable coupon that airlines can reprice when incentives shift. Recent news cycles about devaluations and program rule changes prove the point.
Finally, watch signals that actually move your redemption life, not just headlines. If Congress advances routing mandates or a court locks in new fee cuts, expect issuers to tweak sign-up bonuses within weeks, then adjust ongoing earn within quarters. If foreign markets tighten caps, look for copycat moves in the U.S. over the following year. If an airline trumpets record non-ticket revenue, remember where a large chunk originates, and assume the program will protect that cash flow before it protects saver-level award availability. This is not cynicism. It is how platforms behave when they rely on a partner-funded currency.
You might notice this piece used the phrase high credit card fees only twice. That is on purpose. The phrase gets tossed around like a villain, but in loyalty economics it is simply the fuel. If the fuel gets more expensive for merchants and cheaper for banks, shoppers pay a bit more and card users win points. If the fuel gets cheaper for merchants and pricier for banks, shoppers might see lower posted prices over time, while card users see leaner rewards. Neither outcome is free. Someone pays somewhere. The only smart move for a traveler is to understand who funds your miles, then decide how much of your budget and attention you want to invest in that trade.
If you want the summarized version. Airlines like robust swipe economics because it keeps the loyalty flywheel spinning. Legislators and regulators are taking aim at that revenue, either through routing competition or fee caps. Where fees have dropped, rewards have usually softened. Where fees are capped more aggressively, programs tend to evolve toward spend-based status and tighter perk gates. If the U.S. follows that path, your game plan does not need to be complicated. Keep a diversified points setup, earn with a goal, redeem faster, and value cash fares with the same respect you give to award charts. The points life will still work. It will just demand a cleaner strategy, not blind faith in unlimited freebies.
Where the numbers come from: formal definitions of interchange and their role in rewards funding, airline and bank disclosures on loyalty revenue, current U.S. legislative proposals and settlements, and the record from Europe and Australia on the effect of caps. Together they map the pressure points that will decide how generous your next “free” flight really is.
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