What would you think of a proposal to create a consumer financial system in which the poor subsidize the well off? How about one that raises costs for those who do not use credit while imposing hefty penalties on those who use it unwisely?
If all that sounds good, read no further. That is the system we have now.
The current system is a maze of hidden fees. When you buy something for $100 with a piece of plastic, the store receives less than $100.
How much less depends on what kind of business the store has. (Food stores pay smaller fees than clothing stores.) It depends on what kind of market power the store has. (Home Depot gets a bigger share than Fred’s Hardware.) It depends on whether the card is a credit or debit card. (Debit cards have lower fees.) It even depends on whether a credit card offers rewards. So when I use the Visa card that gives me airline miles, the merchant gets less than if I use a basic Visa card.
It seems reasonable to assume that the costs of all that are included in the prices charged to everyone. “Food stamp recipients pay the higher credit prices for things they buy with food stamps,” said Mallory Duncan, the general counsel of the National Retail Federation. “They are subsidizing the people who get miles.”
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