Researchers affiliated with the Federal Reserve Bank of Boston have claimed that the credit card market structure transfers money from lower income households to wealthier ones.
"Who Gains and Who Loses from Credit Card Payments? Theory and Calibrations," was authored by Scott Schuh and two other researchers affiliated with both the bank and the Consumer Payments Research Center. Schuh is a senior economist with the bank's research department.
"On average, each cash buyer pays $151 to card users and each card buyer receives $1,482 from cash users every year, a total transfer of $1,633 from the average cash
payer to the average card payer," the researchers said.
"On average, and after accounting for rewards paid to households by banks, when all households are divided into two income groups, each low-income household pays $9 to high-income households and each high-income household receives $434 from low-income households every year. The magnitude of this transfer is even greater when household income is divided into seven categories: on average, the lowest-income household ($20; 000 annually) pays a transfer of $23 and the highest-income household ($150; 000 annually) receives a subsidy of $756 every year," the report added.