Paying Cash? Credit Cards Are Still Costing You Money

Rebates drive up prices for all but reward only users of plastic: Economist
By John Johnson,  Newser Staff
Posted Aug 4, 2011 12:26 PM CDT
Credit card rebates aren't the deal they appear to be.   (AP Photo/Jochen Krause, File)

(Newser) – Credit card rebates and rewards may seem like a great thing—like getting free money. The problem is that they're driving up the prices of everything we buy, writes economics professor Larry Harris. What's worse, people who pay cash—maybe because they're too poor to qualify for credit or are trying to be smart with money—suffer the most, Harris writes in the Los Angeles Times. To pay for the rebates, credit card companies charge merchants higher fees, and those merchants charge consumers higher prices.

"All customers pay the higher prices, but only the credit customers ultimately receive the rebates," writes Harris. "So cash customers are the ones most hurt." The rebates also encourage people who may not want to pay with credit to use plastic. The new Consumer Financial Protection Bureau can help by making stores disclose the cash price of an item along with the surcharge added for credit cards. It also can rein in the rebate programs to help end this "disguised coercion." Read the full column.

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