How Lower-Income Consumers Are Subsidizing Your Credit Card Points

As America gradually becomes a cashless society, credit card rewards programs have become increasingly popular, offering to give consumers back a portion of what they spend in the form of points to be used on flights or hotel stays, or cash back. To pay for these rewards, credit card companies have raised the fees they charge merchants for every credit card transaction, and merchants in turn pass that increased cost onto customers by raising prices. These higher prices impact all consumers, but only those with credit cards, on average wealthier than those without, enjoy the resulting benefits. We talk about this system where those without credit cards foot the bill for the rest.

Guests:

Chenzi Xu, assistant professor of finance, Stanford Graduate School of Business

Aaron Klein, chair and senior fellow in economic studies, Brookings Institution; former deputy assistant secretary for economic policy, the Department of Treasury (2009-2012)

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