How Credit Card Rewards Subsidize the Wealthy

In this episode of Inequality Conversations with Fexingo, Lucas and Luna explore how credit card rewards programs — often seen as a perk for savvy spenders — actually function as a regressive transfer from low-income cash users to affluent cardholders. They anchor the discussion on a 2023 Federal Reserve Bank of Boston study finding that households in the bottom 10 percent by income pay roughly $150 per year in fees and interest that effectively subsidize rewards for the top 10 percent, who receive over $1,100 annually in cash back and points. Lucas explains how merchants raise prices across the board to cover swipe fees, meaning everyone pays more regardless of payment method. Luna points out that the unbanked — who cannot access rewards cards — are hit hardest. They also discuss how the Credit Card Competition Act, stalled in Congress, would address the issue by forcing more competition in card processing. The episode closes with the hosts reflecting on whether transparency around interchange fees could shift consumer behavior and policy. #CreditCardRewards #WealthGap #InvisibleSubsidy #SwipeFees #InterchangeFees #Unbanked #RegressiveTransfer #FederalReserve #BostonFed #PricingInequality #ConsumerFinance #EconomicJustice #CreditCardCompetitionAct #CashUsers #MerchantFees #WealthTransfer #FexingoBusiness #BusinessPodcast Keep every episode free: buymeacoffee.com/fexingo