Credit card perks are costly for consumers
Thursday, November 19th, 2009
By: Tom MacDonald
tmacdonald@whyy.org
A new study shows low income residents – and minorities in particular – are paying extra to support credit card incentive and cash back programs.
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The ads are everywhere: get cash back for using a credit card to purchase gas or groceries. But merchants pay for those programs by raising their bottom line prices.
A study by the Hispanic Institute and University of Pennsylvania shows that low income consumers are paying for the programs, but not receiving the benefits.
Efraim Berkovich is an economist at the University of Pennsylvania who was an author of the study. He says poorer customers don't have credit cards but still pay a fee for the incentive programs.
Berkovich: The prototype of the person that would be impacted the most is someone who pays for everything completely in cash. So that would certainly cover a lot of lower income people.
The Hispanic Institute is calling on merchants to offer cash discounts or discounts for people who don't benefit from the incentive programs.
Good point their is no free lunch!