Will Congress Take Away Your Credit Card?

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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.

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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.

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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.



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