Credit Card Perks: How Everyone Subsidizes the Heavy-Hitters | RealClearInvestigations:
"..
.a new privileged class, credit card sophisticates who are showered with freebies and lavished with attention by major banks grateful for their spending habit.
But there is, of course, no such thing as a free trip to Bali.
Someone picks up the tab for all these pricey benefits, and those people are hardly a secret.
Banks charge merchants a transaction fee for swiping their cards, and the
merchants pass on the cost to all customers, rich and poor, imposing an invisible fee
even on customers who pay with cash.
On top of that, financial institutions collect monthly interest payments from the majority of card holders who don't, or can't, pay off their bills every month.
The effect this funding redistribution has on the poor is complex and disputed, but the riches flow back to credit card spenders in a pattern that consumer advocates call the reverse Robin Hood effect.
...In a consequence probably not anticipated by reformers in Congress, banks now compete for well-heeled customers by paying them to charge their personal needs and business expenses while offering them high-status experiences with star power.
"It's a cross-subsidization in which
the poor are subsidizing the rich through the payment system," said Aaron Klein, an economist at the Brookings Institution in Washington, D.C. "This entire stream is reverse to income."...
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