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Are Credit and Debit Card Reward Programs Unfair to the Poor?

Tuesday, March 2, 2010 - 7:18 AM
Chicago Tribune article reports on a study on this issue:
To pay for the rewards programs, which are heavily skewed toward the higher-income brackets, the card companies have boosted the processing fees retailers pay. "The result is massive transfer of wealth from poor to rich" in the checkout line, said Shapiro.
It should be noted that the study came from Consumers for Competitive Choice, a group connected to retailers who would like to see a reduction in the swipe fees (interchange fees).
Ken TuminKen Tumin5,472 posts since
Nov 29, 2009
Rep Points: 125,708
1. Tuesday, March 2, 2010 - 5:19 PM
The cash back that you get from the rewards program is essentially a rebate percentage of the processing fees that is charged to the merchant for making the transactions.  That is why some merchants offer discounts if you pay in cash.  I tried to purchase a new car by paying it with a credit card. The dealer wouldn't accept it and only allowed up to a $1000 credit card payment when I used the card.  I have over $60,000 in total credit line and could have easily gotten back over $200 in rewards money had they accepted the payment completely by credit card.

The fees charged by credit card brand are in increasing order: Discover, MasterCard, Visa, and American Express.
AnonymousAnonymous2,282 posts since
May 9, 2010
Rep Points: 3,957