Study Reveals Credit Card Rewards Programs Hurt America's Poor

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Popular Rewards Cards Have Unintended Consequences for Low-Income Households According to Analysis By

A report released today by, a leading credit card intelligence and resources firm, has revealed information that many consumers are likely to find disturbing: America’s poor are shouldering the burden of credit card rewards programs. The report, citing a recent Federal Reserve Bank of Boston study, points to empirical evidence supporting economists’ longstanding theory that lower-income households are unknowingly subsidizing the vacations, airline miles and cash rebates of rewards cardholders.

“The problem,” says founder Bill Hazelton, “lies in the fees credit card providers charge merchants to use their payment networks.” These fees, known as restraints, collect a small percentage of a merchant’s profits from a credit card transaction which is then used to finance the rewards offered to cardholders.

Since reward-hungry cardholders are swiping their plastic more than ever, some merchants have actually been forced to raise prices to offset these fees. As a result, lower-income households – who pay primarily with cash – are being forced to pay a disproportionately higher amount for purchases relative to what rewards cardholders pay. “Credit card rewards programs are like Robin Hood’s evil twin,” Hazelton says, “robbing the poor to pay the rich.”

Although the process sounds complex, the numbers don’t lie. Boston’s Federal Reserve found that households that primarily pay with cash – typically the ones that earn less than $20,000 a year – pay an extra $21 annually because they don’t have rewards-based cards, while households that do use the cards receive as much as $750 in rewards every year.

To remedy this problem, the report suggests that card issuers consider filling the void in the marketplace with a line of low-limit rewards cards for lower-income families and individuals. These cards would reward responsible use with discounts on necessities like gas and groceries at an acceptable risk for card issuers. “As consumers and citizens, it’s our responsibility to fix this,” Hazelton says. “Modifying rewards card programs in this way would level the playing field for everybody.”

The current economic climate is something Hazelton knows all too well. He founded to advise consumers and small business owners on the perils and pitfalls of the credit card industry. Cited by publications like Entrepreneur Magazine, the company has grown into one of the leading credit card information resources on the Internet and has been a vocal advocate of consumer awareness since its establishment in 2004.

To learn more about Credit Card Assist or to schedule an interview, please email bill(at)creditcardassist(dot)com. More information and the entire report can be viewed at


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