Poor Americans subsidize credit card rewards

Consumer watchdog groups have long asserted that the fees levied by credit card companies drive up retail prices for all consumers, which means cash-payers shoulder the burden whenever someone whips out the plastic. Now, a new report from the Boston Federal Reserve not only validates this hunch but goes a step further: Since card companies charge merchants more to process reward credit cards (such as those which give airline miles or hotel points for each purchase), those rewards are essentially subsidized by cash-paying, often lower-income consumers.

The report reads, "On average, each cash-using household pays $151 to card-using households and each card-using household receives $1,482 from cash users every year." That's a tremendous disparity, and further research showed that the ones bearing the brunt of this inequality are the poorest Americans.