Credit Card Rewards: A $9.2B Wealth Transfer from the Poor to the Rich
Credit Card Rewards Became a $9.2B Wealth Transfer
Harvard Business School research reveals that credit card rewards constitute a massive wealth transfer: $9.2 billion annually from lower-income households to those earning over $150,000. Professor Mark L. Egan and colleagues analyzed data from Fiserv covering 1.8 million merchants, finding that interchange fees effectively impose a 26% higher sales tax on cash payers compared to premium card users. The study also shows the Durbin Amendment backfired, hurting middle-income debit users most, and offers insights for merchants navigating the fee landscape.
It's just the way the market was set up; it turns out to be unfavorable to people who use cash and debit, and those who happen to be people with low incomes.