7/29/2010

The Federal Reserve Bank of Boston discovered in a recent analysis of credit card fees in the U.S. that they amount to a huge transfer of wealth from low-income to high-income households, accomplished through rewards given to big-spending cardholders. On top of that, merchants increase their prices to pay an interchange fee of 1% to 2% but don't compensate consumers who pay with cash. "As a result, cash customers are subsidising credit-card users," The Economist notes. "And because credit-card users tend to be richer, the transfer of wealth is regressive."

Related Summaries