Reverse Robin Hood
A new report has revealed, once again, that the credit card industry’s fees hurt those least able to afford them.
A summary of the report is here and you can read the full report here. The report’s key findings include:
- “The current banking and credit card system redistributes wealth upward, with the middle- and working-class subsidizing credit card rewards for the wealthy.”
- “Top earners net about $100 annually in credit card rewards after fees, while the bottom 80% pay $300 to $500 more in fees than they receive in rewards.”
- “This net loss is especially burdensome for middle-income families, who also face the highest rates of direct bank fees such as overdraft and maintenance charges.”
- “The bulk of payment-related fees are hidden in the cost of everyday items through credit card fees built into retail prices.”
- “For lower-income families, banking and transaction fees can be the difference between financial stability and hardship. If even a portion of these fees could be saved instead, it could push a household into the high-saver category within a few years—helping them escape the cycle of living paycheck to paycheck.”
- “Costs of credit card acceptance (over and above the cost of debit card acceptance), are comparable to the total interest households pay on their credit cards, at about $100 billion per year or about $800 per household.”
The report’s findings are just the latest to show that credit card swipe fees hurt middle- and low-income people the most.
A 2020 working paper from Boston Federal Reserve economists came to the same conclusion: swipe fees combined with rewards programs amount to a regressive system in which low-income Americans subsidize high-income Americans. Read it here.
A 2022 study from the Hispanic Leadership Fund found exactly the same thing: “Lower income Americans are losing money to higher income individuals.”
- “American families earning less than $75,000 per year send a total of $3.5 billion to families earning more than $75,000 per year.”
- “More than $1.9 billion of that money goes into the pockets of those making more than $150,000 per year.”
- “Families making less than $20,000 per year pay more than $1.2 billion of the $3.5 billion that gets transferred to higher income people.”
Read it all here.
It has been shown time and time again: when Visa and Mastercard price-fix swipe fees for big banks and dominate credit cards by stifling competition, it hurts middle and low-income families the most.
COMPETITION IS BETTER FOR EVERYONE
IT'S TIME TO PASS THE CREDIT CARD COMPETITION ACT