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Credit Cards Take From Poor, Give to the Rich
Wall Street Journal ^ | 07/27/2010 | Michael S. Derby

Posted on 07/28/2010 7:10:39 AM PDT by SeekAndFind

Credit cards appear to be the reverse Robin Hoods of the financial world.

A new paper from the Federal Reserve Bank of Boston says merchant fees and reward programs offered by many credit-card issuers essentially take money from those who have the least and give it to those who have the most. The imbalance may have to be remedied via government intervention, the authors, Scott Schuh, Oz Shy and Joana Stavins, argued. The paper was published as part of the bank’s Public Policy Discussion Papers on Monday.

It comes amid big changes for the financial industry, as the nation’s bank regulators look to implement newly passed oversight overhaul legislation, some of which is aimed at protecting consumers from unfair credit-card practices.

The paper said that on average, households that use cash for purchases give $151 to those households that use credit cards annually. Meanwhile, card-using households get $1,482 from those who pay cash. The paper calls this a “regressive transfer” of wealth. At the heart of the issue is a lack of knowledge.

“The typical consumer is largely unaware of the full ramifications of paying for goods and services by credit card,” and is unaware how the fees merchants pay to offer payment by credit affects the setting of overall prices, the paper said.

While this system offers flexibility and options for card users, it simply raises prices for those who pay cash. The paper notes that while the percentage of households using credit cards has been relatively steady at around 75%, total consumer spending via cards has risen from 9% to 15% over the last two decades, increasing merchant fees.

Distortion of prices due to things like merchant fees is further exacerbated by the reward programs that are usually only available to those who spend more via credit cards

(Excerpt) Read more at blogs.wsj.com ...


TOPICS: Business/Economy; Culture/Society; News/Current Events
KEYWORDS: creditcards; debt; poor; rich

1 posted on 07/28/2010 7:10:41 AM PDT by SeekAndFind
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To: SeekAndFind

women and minorities most affected


2 posted on 07/28/2010 7:12:38 AM PDT by nascarnation
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To: SeekAndFind
More complete nonsense by completely ignorant fools.

The solution is better education on credit not more Progressive Fascists government action

3 posted on 07/28/2010 7:13:00 AM PDT by MNJohnnie (The problem with Socialism is eventually you run our of other peoples money. Lady Thatcher)
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To: SeekAndFind

Burned up my credit cards for fuel.


4 posted on 07/28/2010 7:13:36 AM PDT by Dan B Cooper
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To: SeekAndFind

Seems only fair since home mortgages were designed to steal from the rich and give to the poor. Its always good to know that my government is full time trying to ruin me. I feel so loved.


5 posted on 07/28/2010 7:14:25 AM PDT by equalitybeforethelaw
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To: SeekAndFind

for the Love of God
when i was in high school i understood that debt was bad for crying out loud. when i went to college i got a credit card and put anything i could on it, then i would pay it off every month - no fees, no interest, no problems. i use the same practice today only i put more bills on it as well. still pay it off every month and have received TONS of rewards including gift cards, cash, dvds etc.
if people just thought about what they were doing and realized that credit cards are not free money everyone could handle using them and the “cash payers” wouldnt feel so cheated


6 posted on 07/28/2010 7:16:37 AM PDT by DM1
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To: SeekAndFind

” The imbalance may have to be remedied via government intervention, “

Of course...

Just as, “To a hammer, everything is a nail”, to an ‘expert’, everything requires Gummint Intervention....

The sad thing is that specious cr@p like this even gets print space in anything besides The National Enquirer...


7 posted on 07/28/2010 7:16:39 AM PDT by Uncle Ike (Rope is cheap, and there are lots of trees...)
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To: SeekAndFind

We can’t have a regressive transfer” of wealth. The regime will see this and mandate a 50 cent fee on all credit card sales which will be given to those downtrodden oppressed victims of those evil White capitalists.


8 posted on 07/28/2010 7:17:17 AM PDT by Leftism is Mentally Deranged (liberalism: severe deterioration of the thinking apparattus)
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To: equalitybeforethelaw

Some things benefit the poor, some benefit the rich.

Instead of arguing over stupid crap like this we should focus on rebuilding a solid economic foundation.

One doesn’t have to be “rich” to get a credit card - you can have great credit on a low income or horrible credit on a high income and everything in between.


9 posted on 07/28/2010 7:17:32 AM PDT by RockinRight (Outrage does not make the law.)
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To: SeekAndFind
Then shop at places like Aldi which don't accept credit cards.
10 posted on 07/28/2010 7:18:23 AM PDT by KarlInOhio (Gun control was originally to protect Klansmen from their victims. The basic reason hasn't changed.)
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To: SeekAndFind

Well, I do the treasury books for a small non-profit org. We had a credit card machine for a few years. The fees the CC companies charge are ridiculous, like 4% per transaction. Plus hundreds more in monthly yearly fees. No way is this any sort of free market enterprise. We got rid of the machine as soon as the contract expired and take only cash, checks and PayPal.


11 posted on 07/28/2010 7:19:33 AM PDT by Seruzawa (If you agree with the French raise your hand - If you are French raise both hands.)
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To: Leftism is Mentally Deranged
will be given to those downtrodden oppressed victims

after government has taken a 40% cut to administer it, LOL

12 posted on 07/28/2010 7:20:25 AM PDT by nascarnation
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To: SeekAndFind

So don’t use credit cards....like the rest of learned 30 years ago.

Idiots.


13 posted on 07/28/2010 7:22:37 AM PDT by roses of sharon (I can do all things through Him who strengthens me. Philippians 4:13)
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To: SeekAndFind

Can’t we just remedy all that troubles by firing our jug-eared jackass? I mean the racism in this fellow is popping out every orifice.

So now companies which give goodies to people who use their services are racist? Why not go back to the poor need houses too and just give them one.


14 posted on 07/28/2010 7:23:13 AM PDT by Tarpon (Obama-Speak ... the fusion of sophistry and Newspeak. It's not a gift, it's just lies.)
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To: DM1

When I was in high school, we were actually taught about debt, interest rates, balancing a check book, how to write a budget.

This is another example of the failure of public education that the average person doensn’t understand how credit cards work, as the article states they don’t.


15 posted on 07/28/2010 7:25:36 AM PDT by FarmerW (Hell hath no fury like a bureaucrat scorned. - Milton Friedman)
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To: FarmerW

i know isnt it awful
to be honest i dont know how people paid cash for everything back in the day
it is so much easier to use one card, one check in the middle of the month (or online bill pay which is what i do) and your done. at least for the most part my idiotic phone company (land line) charges 4 bucks if i pay with a credit card so i send a check in (they dont even have online bill pay). my cable bill, kids school, gas, groceries, entertainment all go on the credit card it is so much easier.


16 posted on 07/28/2010 7:37:03 AM PDT by DM1
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To: SeekAndFind
Yea, shame on me for earning cash back, paying off my CC bill every month, and not using the damn thing as a long term loan vehicle. Just like firearms, the user determines the nature of the use. As for vendors, I once heard a small business owner say that 3% was well worth not having to hold large sums of cash and make deposits every night.
17 posted on 07/28/2010 7:55:07 AM PDT by Niteranger68 (I believe in man-made political climate change.)
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To: SeekAndFind
...essentially take money from those who have the least and give it to those who have the most.

Can these mental giants tell me of ANY credit/loan program where people (who don't have money) borrow money (from people who do have money) with no expectation of repaying the money with interest? (Stupid bawney frank-type government programs do not count!)

I recommend that I be put in the position of deciding if each credit card applicant is responsible enough to have a credit card. Is that what these people want? We should make poor people ineligible to have credit cards.

18 posted on 07/28/2010 7:59:28 AM PDT by Onelifetogive (For the record, McCarthy was right.)
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To: SeekAndFind
Credit cards appear to be the reverse Robin Hoods of the financial world.

No, credit card companies rob from their Republican customers to extend more credit to Democrats. A record 11% of all credit card sales are never paid for, sticking it again to the people that behave responsibly. Credit cards are the modern way to shoplift, and mostly Republicans cover the cost of this theft.

19 posted on 07/28/2010 8:18:37 AM PDT by Reeses
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To: Niteranger68
Yea, shame on me for earning cash back, paying off my CC bill every month, and not using the damn thing as a long term loan vehicle

Actually, I have judiciously used my credit cards for somewhat long term loans with interest rates averaging 1.9%. Seemed like a good deal to me.

20 posted on 07/28/2010 8:19:13 AM PDT by Prokopton
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To: Dan B Cooper
Burned up my credit cards for fuel.

I just pay mine off every month and get free stuff back. When I and Mrs. Lonesome took a cruise, I paid with Discover and the kick back from Discover was worth more than a $50 gift card from Kohl's (where Mrs. shops anyway). If I hadda pay interest on the credit card, I would have have paid cash or check instead.

Thanks for the dough, suckers.

Basically, "finacial reform" is a wealth transfer from the frugal and careful to the clueless and improvident.

21 posted on 07/28/2010 8:24:35 AM PDT by Lonesome in Massachussets (The naked casuistry of the high priests of Warmism would make a Jesuit blush.)
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To: SeekAndFind

The poor use coupons, get free toys in their Happy Meals, and...of, well, the poor are stupid and the ability to think a company giving incentives to use their products is a scheme for the rich just proves it.


22 posted on 07/28/2010 8:29:01 AM PDT by CodeToad ("Idiocracy" is not just a movie.)
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To: SeekAndFind

Government correction of the problem?

Is that the government containing Charlie Rangle, Barney Fwank, Chris Dodd and the rest of the folks who couldn’t pass an Econ 101 course and all of whom should be in jail?


23 posted on 07/28/2010 8:29:25 AM PDT by Da Coyote
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To: SeekAndFind

‘The imbalance may have to be remedied via government intervention, the authors, Scott Schuh, Oz Shy and Joana Stavins, argued.’

Seems to be the solution for everything these days. The very dictionary definition of socialism.


24 posted on 07/28/2010 8:41:12 AM PDT by Jack Hammer
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To: SeekAndFind

Heaven forbid anyone be rewarded for acting responsibly.


25 posted on 07/28/2010 8:48:30 AM PDT by eclecticEel (Life, Liberty, and the Pursuit of Happiness: 7/4/1776 - 3/21/2010)
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To: Prokopton
Actually, I have judiciously used my credit cards for somewhat long term loans with interest rates averaging 1.9%. Seemed like a good deal to me.

Agreed! That's a smokin' good rate! My only fear with financing something on a CC with that low of a rate is the rate changing.

26 posted on 07/28/2010 9:02:54 AM PDT by Niteranger68 (I believe in man-made political climate change.)
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To: SeekAndFind
Cancel the cards. This is just a rehash of the "I'm too stupid to read the contract" approach to financial irresponsibility. Miss 2 consecutive payments...cancel. No more access to credit for the irresponsible and uncreditworthy.
27 posted on 07/28/2010 9:18:12 AM PDT by Myrddin
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