A recent paper quantifies the economic inequities exacerbated by the way that credit cards that offer rewards to their users work.

Of course the cost of these rewards has to come from somewhere.

This includes the various fees and interest charged by the credit card companies to its users. Unsurprisingly, people with low credit scores are more likely to end up paying these fees.

Now whilst credit rating doesn’t correlate 1:1 with e.g. income - so as the paper says the net effect isn’t a pure “take money from the poor to give to the rich” money grab - it does predictably correlate with various other dimensions of potential privilege. It’s obviously a lot easier to pay off your credit card balance and not incur interest charges if you have a big pile of existing money at your disposal.

Credit card companies also make money by charging shops every time a customer uses their credit card. To the extent that the need to fund rewards results in the credit card companies increasing the merchant fees to retailers, who correspondingly increase their products' prices to compensate, that’s also another way that poorer folk may be penalised - a small % increase in cost may not be noticed by the wealthy, but for people in poverty it might be that every penny counts.

Retailers don’t usually charge different prices for customers based on which card they use to purchase something, and so those people who don’t choose to use or do not have access to rewards credit cards may end up paying for other people to get rewards.

We estimate an aggregate annual redistribution of $15 billion from less to more educated, poorer to richer, and high to low minority areas, widening existing spatial disparities.