I spotted an interesting article on the NPR site. The article is about a study done by economists pointing to the fact that rewards credit card programs may not be rewarding for everyone, someone has to be footing the bill. Despite the age of the article, it’s two years old, I’m sure it still rings true. Essentially the article concludes that based on this study, rewards credit cards are paid for by the poor and that the rich actually get richer from them.
The logic behind this is that the rewards credit cards make everything more expensive for everyone because of the interchange fees they charge businesses to accept credit. Despite the fact that these fees are passed on to and paid by everyone, typically higher income households have more credit cards and utilize them more for purchases therefore getting the rewards back from these credit cards. This creates a net loss for the poorer people and a net gain for the richer people.
According to the economists,“On average, and after accounting for rewards paid to households by banks, the lowest-income household ($20,000 or less annually) pays $23 and the highest-income household ($150,000 or more annually) receives $756 every year.”
At this point in my life, I’m not even close to the $150,000 household income mark, but I do receive substantially more than $756 a year from rewards. I’ll do double that easy in one trip. My next trip, which will be my Honeymoon, will crush that $756 figure by more than $10,000!
So I ask, which side of the fence are you?