How would you feel about Congress snatching away your credit card or preventing you from participating in credit card reward programs?
Don’t laugh. Left-wing groups in Washington are declaring that the plastic card in your wallet is the financial villain that needs to get reined in.
A new study from researchers at the Federal Reserve Bank of Boston finds that credit card reward programs are unfair because they create “an implicit money transfer” to wealthy cardholders from lower-income people who buy things with cash or debit cards.
The study infers that consumers who pay with plastic and rack up reward points receive a $756 “subsidy” per year, while the poorer people who pay with cash pay $23 more. Egads. That’s the price of a movie ticket.
Left-wing agitators have asked the Federal Reserve Board and the Consumer Financial Protection Bureau to do something about these inequities. Don’t be surprised if congressional members who hate credit card companies, including Sen. Dick Durbin of Illinois, call for regulations or cancellations of reward programs.
These groups have invented a clever new term for this supposed injustice: the “reverse Robin Hood” effect.
But reward programs are the ultimate win-win marketing invention. First, they are popular with consumers — millions diligently accumulate points so they can win free vacations, home appliances, first-class upgrades on airline flights and other freebies. They are a modern version of the old S&H Green Stamps program that was popular with shoppers for almost 100 years until the late 1980s, in which the more things you bought, the more green stamps you were awarded for purchasing other items.
Merchants love the programs because they encourage people to buy more goods and services at their stores. And the credit card companies get more fees.
So what, exactly, is the problem?
Nowadays, credit cards are relatively ubiquitous. Merchants and retailers sponsor roughly 355 million rewards cards in the U.S. market because the benefits of accepting them exceed the cost. These 355 million cards aren’t all in the hands of the wealthiest 1%.
Limiting or even outlawing these award programs would only ensure that credit cards would be less available to families and that only more affluent people could access credit cards. This would only make the poor worse off. Credit cards are popular because pulling out the plastic is convenient as we move closer every day to a cash-free digital society. That’s especially true when a family is temporarily short of cash and needs to make emergency purchases.
Many rewards cards have no annual fee, and the only hurdle is whether one has a good credit score. There are millions of high earners with poor credit scores, and millions of middle-class people with excellent scores.
An International Center for Law & Economics study rejected the idea of a “reverse Robin Hood” effect. The ICLE reports that “86% of credit cardholders have active rewards cards, including 77% of cardholders with a household income of less than $50,000.” It is entirely wrong to argue that one must be rich to have a rewards credit card.
Liberals in Congress may seize upon the “reverse Robin Hood” narrative to enact price controls on credit card fees before. That has been tried before, and those controls haven’t worked to lower prices for anyone.
As part of the Dodd-Frank Act boondoggle, Durbin successfully attached an amendment that placed price controls on debit card transactions. At the time, many, including Durbin and merchants, argued that the price caps would result in retailers lowering prices.
Unsurprisingly, Durbin was wrong. The Federal Reserve Bank of Richmond found that 77% of merchants kept prices the same, and 22% actually increased costs after the price controls went into effect.
Other studies have shown that these regulations resulted in consumers losing access to free checking accounts, and the number of people without a bank account increased by about 1 million. According to a Boston University study, the loss of free checking accounts costs low-income customers about $160 per year.
The policy goal in Congress should be to make it easier for everyone — rich and poor — to have access to credit and reward cards if they want to participate.
This new assault on the plastic card in your wallet would achieve the opposite result. And that would create a real reverse Robin Hood effect.
Stephen Moore is a senior fellow at FreedomWorks. He is also a co-founder of the Committee to Unleash Prosperity and a Washington Examiner columnist. To find out more about Stephen Moore and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
“Left-wing agitators have asked the Federal Reserve Board and the Consumer Financial Protection Bureau to do something about these inequities. Don’t be surprised if congressional members who hate credit card companies, including Sen. Dick Durbin of Illinois, call for regulations or cancellations of reward programs.”
Oh, hell yeah—let’s screw the American people just a little bit more while we sit up here in Congress wrangling over multi-trillion-dollar bills chock full of waste and wrack up the national debt until it touches the floor of Heaven. Never mind our irresponsibility—we want to continue to be the spendthrifts we are and we will create this false narrative that middle-income-to-wealthy Americans are taking advantage of the poor.
The entire elite class in DC can’t hit an approval rating above 38%—that’s Biden, Harris, and Congress. Small wonder. These inept idiots need to learn fiscal responsibility and they need to exhibit some concern for what the everyday citizen encounters in trying to make a living and to try to acquire some nice things in Life. But that is entirely over the head of this bunch. You had best believe that “lavish” and “excess” are key words in their dictionary—and they indulge in whatever they please whenever they please.
ANY CHANCE they get, to screw us over, the left will try to take.
Liberals in Congress have no Constitutional right to take back our credit cards or our rewards, but WE THE PEOPLE have a right to take back THEIRS in elections. Why we have not is the real mystery. Everything they touch turns in corruption, like “Your Social Security Number will be protected, private and only used for your designated benefits”,,,,,,while credit rating companies now use them to control the interest you pay on loans and credit cards, and use it to track your every financial move like a 666 tatoo’d on your forehead. If the liberal Congress is promising equity or equality, you just know they and their privileged class are about to rip you off AGAIN, and set themselvees apart in privilege and financial class divided reward.
How’s about CONGRESS GETS TOLD, pay everything in cash only, NO MORE CREDIT.. AND SEe how they like it!
How ludicrous!
Congress is (and has been) OVER-SPENDING (and just raising the “debt ceiling” and/or printing money) for DECADES – with NO concern for how that money will EVER be re-paid!
Seriously, Congress appears dead-set on DESTROYING the United States’ economy…
Not even the potential FAILURE of ” the full faith and credit of the United States” will deter these IDIOTS from spending us into oblivion!
I WOULD use the age-old phrase: “They spend money like drunken sailors”, but THAT would be an INSULT to drunken sailors!
AND even NOW< they are voting yet again, on RAISING THAT debt ceiling….
The term “equity” is the absolute bane of society. There is a substantial percentage of the American population that could be identified as “Communists”. I even saw a bumper sticker on a car the other day that said “I am a Marxist”. Imagine that occurring even 10 years ago. The problem seems to be we have moved further away from the Soviet domination of eastern Europe and all the cold war realities that a good percentage of the population is now completely ignorant of the most important issues of society. What a mess.
MCCARTHY should have never STOPPED Purging communists and marxists from our nation.
WE USED TO be proud to say better DEAD than red.. Now days sayig that would be seen as “BIGOTRY!”
I was born a free man, I’ll die a free man, today if necessary!
There, I said it….
Americans are in the dark on the effects of modern education and the influence that Socialst Communist educators arehaving on society today while they spew “CRT, to their Students they divide the Races when Race tentsions were beginning to heal from what they were in the past, its almost as though the democrat party , Socialist, Communists want the Races to not get along with each other, if this is the case, we can understand why the democrat party would want division between the Two races so that they can act loke the big defenders of Minorities and in so doing, get their votes
PITY WE can’t take away THEIR CREDIT CARD!