Lawmakers in Colorado want to make life more affordable, but their latest credit card bill will do the complete opposite.
The bill, SB26-134, passed by the House and Senate of the Colorado General Assembly, prohibits card networks from charging fees on the sales tax portion of a transaction.
While this may sound good on the surface, it’s anything but. It bans Visa, Mastercard, Amex and Discover from charging interchange fees on the sales-tax portion of card transactions, exempts banks under $60 billion in assets and hands trial lawyers a fresh private right of action. This is precisely how card networks and their partners are able to fund the lavish rewards programs that millions of consumers depend on.
That means that users and beneficiaries of credit card rewards points and miles will be deprived of using these options in Colorado, which could impact hundreds of thousands of annual visitors to the state, not to mention its own residents.
The retail lobby loves it. The federal courts already partially enjoined the Illinois version (the inspiration for this bill) as preempted by national banking law. Colorado, for some reason, is volunteering to be next.
The bill now awaits final action by Colorado Governor Jared Polis, who has to either veto the bill or sign it before it automatically becomes law on June 13, 2026.
Gov. Polis Can Once Again Be a Champion for Consumers
Polis has been a champion for consumer choice in the state, vetoing a record number of bills related to affordability, online privacy, and overregulation for ride-sharing. If Polis wants to continue his track record, he should veto this credit card bill as well.
Most of the perks consumers get from credit card rewards such as cash back, hotel points, or airline miles are largely funded by interchange revenue, which typically run about 2-4% per transaction; but this bill shrinks that revenue stream by eliminating that part of every transaction. As a result, we will likely see banks cut reward programs and increase annual fees for consumers (similar to the federal Credit Card Competition Act).
What state lawmakers fail to understand
Interchange fees aren’t some hidden tax on transactions. They are the revenue that funds your 1.5% cash back, your Southwest companion pass, your Marriott points and your Chase Sapphire dinner credits. Cap the revenue and the rewards shrink.
That isn’t speculation. It’s exactly what happened the last time Congress tried this, when the 2010 Durbin Amendment capped debit-card interchange fees. Merchants pocketed the savings. Banks responded by killing free checking. A George Mason Mercatus analysis found that the share of banks offering free checking collapsed from 76% to 38% after Durbin took effect. Account fees rose. Consumers ate the cost.
How Consumers Are Negatively Impacted
This will sting for consumers who rely on these perks as the real impact will devalue points, meaning less points will be earned for every dollar spent, reduced sign-up bonuses, and lackluster redemption rates/perks. We could also see less premium cards like those that give consumers access to lounges and travel credits.
Unfortunately, limiting travel rewards essentially removes the shadow subsidy for many savvy consumers and could mean visiting family or going on vacation is no longer viable due to costs. Policies like these more directly impact lower and middle-income consumers who won’t be able to keep up with higher annual fees and fewer rewards, and would also negatively affect those who rely on cash-back to offset costs for everyday necessities like groceries or gas.
Colorado is a tourism state. Skiers from Texas, conventioneers from Atlanta and road-trippers from Nebraska arrive every day and swipe credit cards issued by banks that have nothing to do with Colorado law. SB26-134 expects the world’s payment networks to identify, in real time, whether each one of those cards was issued by a $60 billion-plus institution, whether the Colorado merchant separated state sales tax from the gross transaction, and whether a tax-portion fee applied. Not only is this not feasible, but if it is applied would create even more burdens for Colorado businesses and their customers.
While some might argue that policies like SB26-134 help merchants save money and reduce prices for consumers, it’s quite unlikely any savings will be passed down, especially in high demand areas like Colorado which is known for its tourism.
This bill could directly harm the state’s tourism industry and deter consumers from visiting the Centennial state, while also reducing perks and increasing costs for those who already live there.
The Only Path is a Veto
For Colorado residents and visitors, they cannot afford to have their miles and points choked off by a state legislature intent on making the system work against them. If Gov. Polis wants to once again stand with consumers, he’ll veto SB26-134.