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 ...
women and minorities most affected
The solution is better education on credit not more Progressive Fascists government action
Burned up my credit cards for fuel.
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.
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
” 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...
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.
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.
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.
after government has taken a 40% cut to administer it, LOL
So don’t use credit cards....like the rest of learned 30 years ago.
Idiots.
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.
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.
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.
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.
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.
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.
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