Credit cards that rack up rewards are more expensive for merchants to accept and the cost gets passed along. Lower-income shoppers end up paying the highest net cost.
Low-income consumers are footing more than their share of the bill for the transaction costs that come along with expensive credit card reward programs.
by two senior economists with the Bank of Canada along with economists from the Federal Reserve Banks of Kansas City and Boston.The researchers found that low-income consumers incur the highest net cost for payments as a percentage of transaction value compared to higher-income consumers, who have greater access to credit cards.
The net cost of payments per dollar spent was 1.78 per cent for Canadian consumers with an income of less than $25,000, Welte said during her presentation of the research. On top of interchange fees, there are smaller charges that go to the credit card networks themselves and to the merchant’s payment processor. The latter are companies such as Moneris , Clearly Payments and Square.
The Canadian Bankers Association, a lobby group that represents the country’s major banks, would not comment on the issue of premium credit cards raising overall prices and having an outsized impact on lower-income consumers.recently allowed Canadian merchants to pass along the cost of swipe fees
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