Food Stamp Users Subsidize Your Credit Card Rewards Programs

Food stamp users are helping pay for your credit card rewards programs, according to “Priceless? The Social Costs Of Credit Card Merchant Restraints” (PDF), a paper by Gerogetown professor Adam Levitin published in the Harvard Journal on Legislation.

Merchants have to pay credit card companies a fee for every credit card transaction. Merchants are forbidden from passing this surchage directly to the customer incurring it and so raises all his prices (see pages 37-46). These fees are used to pay for credit card reward programs. The result is that customers who don’t enjoy the benefit of rewards programs, like food stamp users, are paying for them.

Priceless? The Social Costs of Credit Card Merchant Restraints [SSRN]