NYT Op-Ed: Lower-income consumers subsidize credit card rewards programs for the more affluent

It’s headlined The Dirty Little Secret of Credit Card Rewards Programs, by Chenzi Xu and Jeffrey Reppucci. After referring to a study that found that when rewards go up, so do the fees merchants pay for credit card processing, the op-ed explains:

The vast majority of merchants pass these costs on to consumers by charging more for their products — regardless of how one pays.

The result? Lower-income consumers are forced to pay higher prices on the goods they buy, but they rarely receive any benefit from rewards programs, according to the Federal Reserve, which has been tracking the distributional effects of card rewards. Its December 2022 report estimates an annual redistribution of $15 billion in rewards value from poorer people to richer people, from low-education people to highly educated people and from diverse communities to less diverse communities.

Put another way, credit card rewards are essentially a tax on less affluent consumers, who are much more likely to pay for their goods with cash, debit cards or standard credit products that accrue no such rewards.