There is an entire ecosystem dedicated to gaming the credit card rewards system — the Points Guy, who has made himself a household name, and a web of websites and influencers who teach all sorts of tricks and hacks. What people might not realize is that the system is already gamed, just not in the way they think: Credit card perks reward rich Americans to the detriment of the poor. The $200 in cash back you got using your fancy new rewards card often comes at the expense of someone who can’t afford it.
The US financial system is racked with inequities. Sometimes, they’re obvious: who can and can’t get approved for a loan, who has a bank account and who doesn’t. But other times, they can fly under the radar.
Many people who use rewards cards have some idea that those rewards are coming from somewhere. But they likely imagine it’s the bank, not their fellow consumers and businesses, picking up the tab.
Every time a credit card is swiped, the bank charges a fee. It seems trivial, but those fees add up — enough to help pay for rewards like points-funded hotel rooms and cash back. To compensate, businesses raise prices, and so cash users (who tend to be poorer) are often subsidizing the perks going to credit card users (who tend to be richer). And the higher the rewards, the bigger the cost to the unsuspecting people paying for it.
“The American payment system has evolved into a reverse Robin Hood whereby middle-class and working-class Americans who pay with a debit card, prepaid card, or cash are subsidizing the wealthy, who pay less for everything,” said Aaron Klein, a senior fellow in economic studies at the Brookings Institution who has studied and written about this issue extensively.