Credit card rebates don’t pay
The rebates raise prices for everyone, and unfairly punish consumers who either avoid credit or are too poor to qualify for it, said Larry Harris in the Los Angeles Times.
Larry HarrisLos Angeles Times
Cash-back rewards on credit cards only seem like “free money,” said Larry Harris. In reality they “are hurting, not helping, many unsuspecting consumers.” The rebates raise prices for everyone, and unfairly punish consumers who either avoid credit or are too poor to qualify for it. Credit card companies love the rewards programs, of course, because they encourage customers to use their cards for everything from gas to groceries, generating more in interest payments. But the costs of those rewards are passed on to stores as credit-processing fees, and merchants in turn charge all of their customers higher prices.
“It is shameful that despite their poverty or discipline,” cash customers are forced to subsidize rebates for credit card users. The government could fix this injustice by making stores post two prices: a cash price minus the credit surcharge and a credit card price. Studies have shown that people are more likely to use plastic when the cost of doing so is hidden, as it is now. Credit card companies provide a valuable service by making payments “convenient and secure,” but they should not be allowed to get away with “disguised coercion.”