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Credit card rewards system shifts billions from cash users to cardholders
Research from institutions including Harvard, Northwestern, Stanford, and Georgia State indicates that the credit card payment system shifts billions of dollars annually from cash and debit users to credit card users. According to the NBER Working Paper 35067, rewards are not free but are funded through a combination of interest charges, annual fees, consumer prices, and merchant fees.
Merchants typically cover interchange fees as part of their operating expenses. To offset these costs, businesses may raise product prices, accept lower profit margins, or implement surcharges.
From a personal finance perspective, experts suggest that credit card rewards can be used to build long-term wealth if users pay balances in full and invest the resulting cash back rather than treating it as discretionary spending.
Entities
Georgia State University · Harvard University · National Bureau of Economic Research · Northwestern University · Stanford University
Claims
What the coverage asserts, and how many sources carry each claim.
- [○ 1 SOURCE] Investing credit card rewards instead of spending them can build long-term wealth. due.com
- [○ 1 SOURCE] Credit card rewards are funded through merchant fees, consumer prices, annual fees, and interest charges. askthemoneycoach.com
- [○ 1 SOURCE] The credit card payment system shifts billions of dollars annually from cash and debit users to credit card users. askthemoneycoach.com