Credit Card Rewards Became a $9.2B Wealth Transfer

Credit card rewards have become a $9.2 billion wealth transfer annually, according to research by Mark L. Egan, a Harvard Business School professor. Meanwhile, middle- and lower-income households face higher costs due to credit card interchange fees. When businesses raise prices to cover these fees, cash and debit card users shoulder the burden, while credit card users receive the benefits through rewards.

The paper, "Who Pays for Payments?" estimates that interchange fees shift $30 billion from cash and debit card users to credit card users each year. This wealth transfer is as significant as government policies supporting low- and middle-income Americans, such as the Earned Income Tax Credit and unemployment insurance. The findings highlight the growing divide between the wealthy and lower-income households, as credit card users benefit from surging stock prices while struggling middle-income families struggle to afford necessities.