https://www.marketwatch.com/story/walmart-and-target-among-1…
require options for the routing of credit-card transactions over alternative networks
In other words bring competition to swipe fees. Apparently the US has one of the highest fee.
The flip side is that all those “cash back” rebates or frequent flyer points that we in the US take for granted (and are generally not available in other countries) are paid out of those high fees.
There is no free lunch, just lunches you grab from others to eat.
Jeff
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The flip side is that all those “cash back” rebates or frequent flyer points that we in the US take for granted (and are generally not available in other countries) are paid out of those high fees.
There is no free lunch, just lunches you grab from others to eat.
True but shameful. People who play the rewards game, me included, tend to be more wealthy and the money comes from the poor. It’s not just late fees and interest charges. Merchants paying swipe fees raise their prices to cover the cost. I get that back in rewards. People using cash and debit cards, who tend to be poorer, pay more.
https://www.vox.com/the-goods/22454885/who-pays-for-credit-c…
“The American payment system has evolved into a reverse Robin Hood whereby middle-class and working-class Americans who pay with a debit card, prepaid card, or cash are subsidizing the wealthy, who pay less for everything,” said Aaron Klein, a senior fellow in economic studies at the Brookings Institution
"You have this phenomenon at the point of sale, which is consumers who use credit cards — and rewards cards more specifically — tend to be cross-subsidized by consumers who use cash or debit cards,” said Joanna Stavins, senior economist and policy adviser at the Federal Reserve Bank of Boston, who has studied the issue extensively. “It’s specific to what you pull out of your wallet. It just so happens that payment instrument use is correlated with income pretty strongly, so higher-income consumers are more likely to hold a credit card in their wallet.”
A 2010 paper, of which Stavins was also a co-author, found that in this wealth transfer system, households that use cash pay about $149 on average to households that use credit cards, and each of the credit card households gets $1,133 from cash users every year. And, again, because lower-income people are likelier to pay in cash than high-income people, that means the poor are losing out at the hands of the rich.
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