State lawmakers in Illinois and Colorado are taking aim at the credit-card interchange fees that underpin airline rewards programs, a move that could destabilize an already fragile aviation industry. The push comes as Spirit Airlines disappears from the skies, a stark reminder of the sector's vulnerability to financial shocks.
Most Americans view airline miles as a bonus, but they are now a core part of airline business models. Co-branded credit cards generate billions for carriers, providing a financial buffer against volatile fuel costs and labor expenses. Delta alone received $8.2 billion from American Express in 2025, roughly 14 percent of its adjusted operating revenue. American Airlines reported $6.2 billion from similar partnerships, about four times its operating income. As one industry analyst put it, “The modern airline is a gigantic rewards program that just happens to fly airplanes.”
Interchange Fees Under Fire
Credit-card interchange fees—the small percentage merchants pay per transaction—fund fraud protection, payment security, and rewards. PYMNTS Intelligence found that 86 percent of interchange revenue supports rewards, generating $35 billion in consumer value in 2019. Capping these fees would likely slash miles, cash back, and travel perks, hitting households already strained by inflation.
The Federal Reserve Bank of Richmond noted that the 2010 Durbin Amendment, which capped debit-card interchange, led to the near-disappearance of debit rewards and free checking, without delivering the promised savings at checkout. Now, states are trying a similar experiment with credit cards.
Illinois passed the Interchange Fee Prohibition Act, targeting fees on sales tax and tips. Colorado lawmakers have sent comparable legislation to Governor Jared Polis. These bills would force payment networks to untangle transaction components after the fact, effectively mandating a redesign of the national payments system. The Supreme Court’s Barnett Bank standard bars states from significantly interfering with national banks, but these laws test that boundary.
If replicated across states, the patchwork would fragment the $9 trillion card-payments system. One state might exempt tips, another sales tax, another groceries. The result would be a regulatory maze that threatens the $35 billion in rewards consumers rely on, according to the original analysis.
Rewards are not just for luxury travelers. Families use points to visit relatives, middle-class fliers stretch budgets with miles, and small-business owners reinvest savings from cash back. These benefits are a market response to consumer demand, not a giveaway.
The merchant lobby argues that interchange fees raise costs and that rewards users are subsidized by others. But price controls merely shift value from consumers to big retailers, with no guarantee of lower prices. The Office of the Comptroller of the Currency has preempted Illinois’ law for national banks, a crucial step. Yet Colorado is advancing similar measures, and Congress continues to flirt with broader restrictions.
The lesson from Spirit Airlines’ collapse should give politicians pause. Airlines, payment networks, and rewards programs are interdependent parts of a consumer economy. Attacking interchange fees risks grounding the financial model that keeps carriers aloft. As one observer noted, this is a strange time to threaten the thrust that helps the industry stay airborne.
