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Started By
Message
Credit card fees transfer wealth to rich, study finds
Posted on 9/2/21 at 2:36 pm
Posted on 9/2/21 at 2:36 pm
LINK
Not meant to be a political post, more so just proving the point that those who understand interest, earn it and those who don’t, pay it.
Also found this interesting and never thought about it. Merchants are baking in the cost of the cc fee anyway. So if you’re paying cash, you’re still likely paying the cc fee but not getting the rewards that those who are using will.
Not meant to be a political post, more so just proving the point that those who understand interest, earn it and those who don’t, pay it.
quote:
NEW YORK (Reuters Life!) - Credit card fees and rewards programs exacerbate income inequality by acting as a transfer of wealth from poor to rich, according to a Federal Reserve Bank of Boston study released Monday.
Also found this interesting and never thought about it. Merchants are baking in the cost of the cc fee anyway. So if you’re paying cash, you’re still likely paying the cc fee but not getting the rewards that those who are using will.
quote:
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.
13
Posted on 9/2/21 at 2:39 pm to Shepherd88
There's a Vox documentary on Netflix that explains this well. I found it interesting.
Money, Explained
See Episode 2
Money, Explained
See Episode 2
This post was edited on 9/2/21 at 2:41 pm
Posted on 9/2/21 at 2:40 pm to Shepherd88
quote:
Also found this interesting and never thought about it. Merchants are baking in the cost of the cc fee anyway. So if you’re paying cash, you’re still likely paying the cc fee but not getting the rewards that those who are using will.
People, including myself, have posted this for years on this site. Not that there's anything wrong with you missing those.
Posted on 9/2/21 at 2:42 pm to Teddy Ruxpin
Yea a lot of good info gets buried in some of those big threads sometimes.
Posted on 9/2/21 at 2:48 pm to Shepherd88
quote:
After accounting for rewards paid by banks, households who earn more than $150,000 annually receive a subsidy of $756 on average every year, while the households earning $20,000 or less pay $23.
Cool! Now do taxes.
Posted on 9/2/21 at 2:48 pm to Shepherd88
quote:
those who understand interest, earn it and those who don’t, pay it
Correct
Although I think the way this is framed in reporting is backwards. People who understand money and plan ahead to maximize its use accumulate more money over time. Reporting tends to ignore the causation there and talk about this as if this were a cause of systemic inequality instead of an outcome determined by personal behaviors
Posted on 9/2/21 at 2:49 pm to Teddy Ruxpin
Yep, it really isn't a secret that credit cards, used and paid properly are the best way to fund purchases. So many people a) can't manage personal funds and live within a realistic budget or b) think that credit cards are the devil and live in a cash world.
Posted on 9/2/21 at 2:53 pm to molsusports
I'm shocked that they didn't link this to racism. I'm sure it's coming though.
Posted on 9/2/21 at 3:07 pm to VABuckeye
Ya there's some other factors like behavior changes etc., but on the subsidizing of the interchange fee by cash buyers alone, CCs win that one for obvious reasons.
However, I've seen more merchants try to charge CC users more to recover those fees from the "rightful" persons so we'll see how long that advantage continues.
Other countries have also limited the interchange fee amount which effectively killed rewards and CC usage at all.
However, I've seen more merchants try to charge CC users more to recover those fees from the "rightful" persons so we'll see how long that advantage continues.
Other countries have also limited the interchange fee amount which effectively killed rewards and CC usage at all.
Posted on 9/2/21 at 3:28 pm to Shepherd88
People who are bad with money will find ways to lose it no matter how much regulation they pass.
There has been various legislation over the years to help consumers that "struggle" with debt like this. Yet here we are same as before.
I am not arguing that all of the protections put in place are bad. But if we move from credit cards to something else, it will be the same outcome
There has been various legislation over the years to help consumers that "struggle" with debt like this. Yet here we are same as before.
I am not arguing that all of the protections put in place are bad. But if we move from credit cards to something else, it will be the same outcome
Posted on 9/2/21 at 3:42 pm to AUHighPlainsDrifter
quote:
Cool! Now do taxes.
Posted on 9/2/21 at 4:23 pm to Shepherd88
This is why our schools do a disservice to our kids by not teaching them investment strategies, credit cards, student loans, budgets, taxes, etc.
Posted on 9/2/21 at 4:31 pm to Triple Bogey
Because the world is run by big banks. Educating the masses would hurt profits.
I wonder if JPMorgan ever sends Dave Ramsey an FU card?!?
I wonder if JPMorgan ever sends Dave Ramsey an FU card?!?
Posted on 9/2/21 at 10:04 pm to Shepherd88
card companies: Now that society is hooked on using cards, we no longer have as much incentive to offer rewards and will dial them back. But we will say we are doing so for the altruistic reason of addressing income inequality.
Posted on 9/3/21 at 7:24 am to Triple Bogey
quote:
This is why our schools do a disservice to our kids by not teaching them investment strategies, credit cards, student loans, budgets, taxes, etc.
What about parents? My dad taught me how to manage my finances.
Schools can’t even teach everyone to read or do math proficiently.
This post was edited on 9/3/21 at 7:26 am
Posted on 9/3/21 at 7:31 am to Twenty 49
quote:
card companies: Now that society is hooked on using cards, we no longer have as much incentive to offer rewards and will dial them back. But we will say we are doing so for the altruistic reason of addressing income inequality.
Well they are competing with each other, so they do have reason to offer incentives. They need that swipe fee
This post was edited on 9/3/21 at 7:39 am
Posted on 9/3/21 at 7:58 am to Shepherd88
quote:
JULY 26, 2010 12:42 PM UPDATED 11 YEARS AGO
Posted on 9/3/21 at 8:39 am to AUHighPlainsDrifter
quote:
After accounting for rewards paid by banks, households who earn more than $150,000 annually receive a subsidy of $756 on average every year, while the households earning $20,000 or less pay $23.
Why don't they just say that people who pay off their credit card monthly or more quickly pay less in interest? I guess that wouldn't be a headline.
Posted on 9/3/21 at 8:40 am to Shepherd88
Fun fact:
It actually is a civil illegality to add a charge to credit card transactions and also violates the vendor’s agreement with Visa, MasterCard, etc. Under either, the merchant is supposed to only be able to charge a CC fee if they offer a similarly convenient electronic payment method (i.e., Entergy allows you to pay by CC at a 3% up charge or by bank draft for no charge).
Now, the CC companies are the only ones that really police this in any way and they don’t go out looking for it. If they get complaints about it from consumers, they’ll threaten to cancel the merchant’s contract if they don’t change it.
It actually is a civil illegality to add a charge to credit card transactions and also violates the vendor’s agreement with Visa, MasterCard, etc. Under either, the merchant is supposed to only be able to charge a CC fee if they offer a similarly convenient electronic payment method (i.e., Entergy allows you to pay by CC at a 3% up charge or by bank draft for no charge).
Now, the CC companies are the only ones that really police this in any way and they don’t go out looking for it. If they get complaints about it from consumers, they’ll threaten to cancel the merchant’s contract if they don’t change it.
Posted on 9/3/21 at 7:34 pm to Teddy Ruxpin
quote:
Other countries have also limited the interchange fee amount which effectively killed rewards and CC usage at all.
I’d be surprised if this isn’t the future. No reason for a small business to pay almost 3% fee instead of under 1% due to rewards cards compared to a debit card.
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