Well, consumers don't really lose as long as they have a rewards card right? Whether it's 2.5% fee with 2% rewards, or 0.5% fee with 0% rewards, it's the same to me in the end as long as I'm paying with my card.
With an exception: for all your expenses that get reimbursed for work. If you're putting flights and hotels on your personal rewards card, then it adds up to a very nice little bonus at the end of the month. (But this is also why at some companies, you're required to use a corporate card if your expenses start going above a certain limit -- the company wants the rewards.)
Just like frequent flyer miles, it's an odd little tax-free trick that transfers a little bit more of your employer's money to you. And since people generally identify more with employees than with companies... nobody's really looking to change it.
Really the only real loser here is people who pay cash. It used to be that credit card companies prohibited stores from charging more for using a card (or less with cash). BUT... that was made illegal a number of years ago in many states, and you can now get a 3-5% cash discount at a lot of places, though not everywhere.
I personally feel much safer using a card -- I hate carrying cash, the risk of losing it, not hygienic, etc. -- but I totally understand some people prefer it, or very disadvantaged people don't have access to cards.
Another big thing though is if you are actually realizing those rewards: I vastly prefer a cash rewards card. "Airline miles" are arbitrary. They don't actually equate to either... actually flown miles nor dollar value. So airlines can pretty much devalue them at will, and impose any restrictions on them they want. Who knows what your airline miles actually get you back in value, if you successfully spend them in the first place.
Meanwhile, my credit cards have cash rewards: I know x% of my credit card statement I can credit back to my account. There's a direct cash value I glean from spending with my credit card versus cash and I know what it is up front.
> Really the only real loser here is people who pay cash.
Indeed. Since the price is the same either way most places, if you can buy with a credit card, that's the right choice.
> Well, consumers don't really lose as long as they have a rewards card right?
They lose because rather than spend slightly less money and having that money available (or consumers charging slightly less because they don't have as large of processing fees), they get some targeted benefit that constrains how they gain.
As a simple example, anyone that saved a bunch of frequent flyer miles to use around this time would probably be better off with the extra cash, since most people aren't traveling.
There are of course cases where the thing that would benefit a person the most is also what is offered as a reward, but as we're seeing, circumstances change, and in most cases the reward with the most utility (i.e. cash, or not being charged as much in the first place) is often the most beneficial overall.
I mean, Citibank gives 2% cashback. People who choose miles or other rewards are doing so intentionally, because they think they'll benefit more. Nobody's forcing them to choose a miles reward card. They know the risk they're taking. Cashback is the norm.
(Also, a lot of places let you exchange miles for things like Amazon gift cards as well, practically as good as cash, though the "exchange rate" is often closer to a 1% reward in the end.)
But it's only the portion of consumers that get rewards that don't lose, as much. And its the more well off portion of consumers that are offered and receive good reward cards. Those without end up subsidizing those who do.
With an exception: for all your expenses that get reimbursed for work. If you're putting flights and hotels on your personal rewards card, then it adds up to a very nice little bonus at the end of the month. (But this is also why at some companies, you're required to use a corporate card if your expenses start going above a certain limit -- the company wants the rewards.)
Just like frequent flyer miles, it's an odd little tax-free trick that transfers a little bit more of your employer's money to you. And since people generally identify more with employees than with companies... nobody's really looking to change it.
Really the only real loser here is people who pay cash. It used to be that credit card companies prohibited stores from charging more for using a card (or less with cash). BUT... that was made illegal a number of years ago in many states, and you can now get a 3-5% cash discount at a lot of places, though not everywhere.
I personally feel much safer using a card -- I hate carrying cash, the risk of losing it, not hygienic, etc. -- but I totally understand some people prefer it, or very disadvantaged people don't have access to cards.