[lyall]

You hear this argument pretty often, but it's not true.

Credit card companies do make a lot of money off of interest. But they also make a lot of money off of interchange fees.

Businesses want wealthy customers because they spend more money, so they're willing to pay a higher interchange fee to access those customers. Higher interchange fees mean card companies can offer better rewards, which in turn attract more wealthy customers to their cards.

So even if credit card debt was not a thing, it would still be incredibly profitable for card companies to sell access to their rich cardholder clientele, and to in turn provide rewards to those cardholders.

[pilotneko]

Businesses raise prices to cover the interchange fee, which impacts lower income consumers disproportionately.

[lyall]

Yes, there is something to be said for this argument. Debit card and cash users pay slightly higher prices than they might otherwise, which do subsidize the rewards of credit card users. But this is distinct from the argument presented in the article, which is that poor people's credit card debt funds rich people's airline miles.

But there factors that counteract this. Merchants pay different average fees depending on the mix of cards that they accept. A dollar store probably sees fewer Chase Sapphire Reserved or Amex Platinum cards than a Gucci store does. Accordingly, the average interchange fee they pay is probably lower. [0]

Also fee surcharging is becoming more common in the US these days, and is already common is some other countries. Visa et al. still don't allow merchants to pass on the actual interchange they'll pay, but merchants can charge a fee to credit card transactions that they don't on debit or cash.

But my original point is that giving rich people credit card rewards are not a transfer from the poor to the rich. It's a rational business decision by card companies that does not require any outside funding source, from poor people or otherwise, to make work financially.

0: There are some other factors that complicate this, such as the risk profile of the business. Riskier generally means higher fees.

[imustbeevil]

That's completely arbitrary though. They could also increase prices without any interchange fee. If people are willing to pay, the price goes up.

Cost (of which the interchange fee is but one) only affects the lowest possible price. No one ever gets that price.

[chneu]

CC fees are transferred directly to customers. It isn't arbitrary. There are plenty of low cost stores that don't accept CCs for this reason: it hurts low income people more than others.

It saves 2-3% to the consumer for grocery stores.

[bryanlarsen]

People wouldn't be willing to pay the extra amount if it was cheaper at the store across the street.

But the store across the street also has to pay the interchange fee, so they're not cheaper.

[B1FF_PSUVM]

> make a lot of money off of interest

Looking at the debt numbers (something like 150 billion over 90 days delinquent) that may not even be the case, if you cover unpaid defaults with interest paid.

The mentioned idea of capping interest at 10% would probably mean credit cards not being issued to a large swath of the population.

[cyanydeez]

I always assumed points, rewards, customer loyalty are economic choke points to ream the customer as much as possible.

Specifically with grocery stores, where they can track how price changes affect customer behavior; I'm pretty sure covid proved that they absolute will gouge when given cover.

secondary of course is the sales of data in the big data age.