Posted on 12/07/2021 4:34:44 AM PST by Kaslin
How would you feel about Congress snatching away your credit card or preventing you from participating in credit card reward programs?
Don't laugh. Left-wing groups in Washington are declaring that the plastic card in your wallet is the financial villain that needs to get reined in.
A new study from researchers at the Federal Reserve Bank of Boston finds that credit card reward programs are unfair because they create "an implicit money transfer" to wealthy cardholders from lower-income people who buy things with cash or debit cards.
The study infers that consumers who pay with plastic and rack up reward points receive a $756 "subsidy" per year, while the poorer people who pay with cash pay $23 more. Egads. That's the price of a movie ticket.
Left-wing agitators have asked the Federal Reserve Board and the Consumer Financial Protection Bureau to do something about these inequities. Don't be surprised if congressional members who hate credit card companies, including Sen. Dick Durbin of Illinois, call for regulations or cancellations of reward programs.
These groups have invented a clever new term for this supposed injustice: the "reverse Robin Hood" effect.
But reward programs are the ultimate win-win marketing invention. First, they are popular with consumers -- millions diligently accumulate points so they can win free vacations, home appliances, first-class upgrades on airline flights and other freebies. They are a modern version of the old S&H Green Stamps program that was popular with shoppers for almost 100 years until the late 1980s, in which the more things you bought, the more green stamps you were awarded for purchasing other items.
Merchants love the programs because they encourage people to buy more goods and services at their stores. And the credit card companies get more fees.
So what, exactly, is the problem?
Nowadays, credit cards are relatively ubiquitous. Merchants and retailers sponsor roughly 355 million rewards cards in the U.S. market because the benefits of accepting them exceed the cost. These 355 million cards aren't all in the hands of the wealthiest 1%.
Limiting or even outlawing these award programs would only ensure that credit cards would be less available to families and that only more affluent people could access credit cards. This would only make the poor worse off. Credit cards are popular because pulling out the plastic is convenient as we move closer every day to a cash-free digital society. That's especially true when a family is temporarily short of cash and needs to make emergency purchases.
Many rewards cards have no annual fee, and the only hurdle is whether one has a good credit score. There are millions of high earners with poor credit scores, and millions of middle-class people with excellent scores.
An International Center for Law & Economics study rejected the idea of a "reverse Robin Hood" effect. The ICLE reports that "86% of credit cardholders have active rewards cards, including 77% of cardholders with a household income of less than $50,000." It is entirely wrong to argue that one must be rich to have a rewards credit card.
Liberals in Congress may seize upon the "reverse Robin Hood" narrative to enact price controls on credit card fees before. That has been tried before, and those controls haven't worked to lower prices for anyone.
As part of the Dodd-Frank Act boondoggle, Durbin successfully attached an amendment that placed price controls on debit card transactions. At the time, many, including Durbin and merchants, argued that the price caps would result in retailers lowering prices.
Unsurprisingly, Durbin was wrong. The Federal Reserve Bank of Richmond found that 77% of merchants kept prices the same, and 22% actually increased costs after the price controls went into effect.
Other studies have shown that these regulations resulted in consumers losing access to free checking accounts, and the number of people without a bank account increased by about 1 million. According to a Boston University study, the loss of free checking accounts costs low-income customers about $160 per year.
The policy goal in Congress should be to make it easier for everyone -- rich and poor -- to have access to credit and reward cards if they want to participate.
This new assault on the plastic card in your wallet would achieve the opposite result. And that would create a real reverse Robin Hood effect.
No.
It'll let other, faceless folks do it instead.
There’s an outrage around every corner for these people.
Just like Omarova’s desire to have the Fed take over private bank accounts, this is another in a multi-pronged attack on the everyday economy of the taxpayers.
Stay tuned, tomorrow there will be another attack......from a different compass point.
I’m surprised that Congress hasn’t started taxing credit card ‘cash back’ programs and frequent flyer miles as ordinary income.
Maybe they already do tax it, but it is up to the taxpayer to declare it?
Don’t give em any ideas.
They’ll have to pry my Costco Executive Membership Rewards Visa from my cold, dead hands.
Between the cost savings of buying gas at Costco (approx 0.10/gal cheaper than local Sheetz or Wawa), the 2% Executive Membership cash back from Costco for purchases at Costco, and the 1-4% cash back from Visa for purchases at Costco and everywhere else (gas is 4% cash back), and PAYING THE BALANCE OFF EVERY MONTH, I make enough money to pay for the Executive Membership, and a couple of more shopping trips to, well... Costco.
Just the cost savings from buying gas at Costco will pay for a standard membership ($5/month, 0.10/gal savings, 12 gallons a week).
Ding Ding Ding! A good credit score. THAT is what this whole thing is about. Why should people who won't pay the cards back be denied access to them? That is both racist and an attack on those who don't have the means to keep a job and have a steady income.
If they had their way this would turn directly into the housing market scam of a decade+ ago, You couldn't deny a person their McMansion on their McDitch digging income, and now they will want to have guaranteed access to low interest credit despite a worthless credit rating. Just watch, this is what the solution to this will be they will want to implement costing the creditworthy people even more.
With a $29 trillion deby, someone needs to take away Congress’s credit card.
BTTT
In my day we all started out as lower income people after we graduated from high school. And as one becomes older they don’t just gain wealth but they also gain responsible habits.
In my case, I never got rich, but I got a good credit score. We do everything with credit cards and we pay off in full every month and have a nice credit score that’s about as close to 850 as you can get. But it’s not because we’re rich. It’s because we gained wisdom as we got older and are more responsible than when we were kids.
Of course the secret to this lies in the old phrase,”with age, comes wisdom. But sometimes, age comes alone.”
“finds that credit card reward programs are unfair because they create “an implicit money transfer” to wealthy cardholders from lower-income people who buy things with cash or debit cards.”
I am unaware that I am wealthy. Since when maintaining your credit rating and paying your card off monthly become unfair. My rewards this year was just over $2K. That is peanuts to a wealthy person.
The poor are parasitic on society. The poor are destroying America by being unequal and insisting on equality as a right. They must cease being poor to go forward.
they can lose the inequality by increasing equality by getting off their lazy asses and learning skills.
Inequality is either genetic or self imposed
Just one more example of why conservatives should NEVER let Democrats rule over them, even if it means having to sometimes vote for RINOs in November elections.
There is literally NO END to what the Democrats will go after, and yes, that also includes your grandkids...
Even the grocery store has a rewards program. Besides using our purchase history to send us a coupon booklet, that happens to have coupons for almost everything we buy, there are reward points for the purchase of gas from the store’s station.
The wife saved $.80/gal last time, and with a 36 gallon tank that adds up fast!
I’m sure that soon we will be taxed on that and any discounts earned, including my $5 Ace rewards cards.
Simple solution:
Give CASH or Debit paying customers a 5-7% discout.................
But when foodstamp recipients use their EBT card they get free fuel points and other perks with grocery store loyalty cards. That money should be credited back to the government treasury. But it’s not.
Exactly!😆
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