Bad News for Everyone (But Mostly Debit Card Users)
by Tony Chavira
Credit's just play money anyway.
The Federal Reserve Bank of Boston just published a study about credit card fees and rewards programs and pretty much found that if you're making less than $150,000 you're likely paying $23 a year, while those making more than that on average get $756 in rewards. As usual, the emphases are my own:
The researchers argue that reducing card rewards and merchant fees "would likely increase consumer welfare."
Merchants usually don't charge different prices for card users to recover the costs of fees and rewards, but instead, mark up the prices for all consumers.
As a result, people who pay cash -- and who are more likely to be lower income -- end up subsidizing those who pay by credit card.
U.S. consumer finance data shows that people on a low income are less likely to have a credit card, and those who do, spend less a month on average, than higher earners. High-income consumers are also 20 percentage points more likely to receive credit card rewards -- be they frequent flier miles, cash back or other enticements.
"What most consumers do not know is that their decision to pay by credit card involves merchant fees, retail price increases, a nontrivial transfer of income from cash to card payers, and consequently a transfer from low-income to high-income consumers," Scott Schuh, Oz Shy and Joanna Stavins wrote.
Yup, credit card rewards and fees are actually structured to be wealth-redistribution in favor of the already wealthy in our current economic climate. And they're making all items less affordable for everyone. And it's considered "positive" to use credit and is totally legal, despite the fact that wealth distribution to those who need it is considered negative and many want to make it illegal.
Someone needs to step in and take care of this in the interest of the entire economy. And please, keep the interests of the small percentage of already wealthy people out of this decision-making process... they obviously are totally comfortable with income redistribution in their favor at the expenses of the other 90% of people who pay their bills with hard-earned cash.
Comments
No comments.
