Credit card rewards may seem like a perk for savvy consumers, but behind every cashback bonus or airline mile is a hidden cost that hits working-class families the hardest. In today’s financial system, the middle class and small businesses are footing the bill for rewards that mostly benefit the wealthy.
This quiet but significant redistribution of wealth is baked into the way credit card processing fees work—and it’s costing every household hundreds, if not thousands, each year.
The Hidden Credit Card Fees You Never See
In 2024, the average American household paid approximately $1,000 in hidden credit card fees, according to economist Vladimir Alexandrov. These fees aren’t listed on the receipts. Instead, they show up as interchange fees—charges that credit card companies like Visa and Mastercard impose on merchants for every swipe of a card. These fees typically range from 1.1% to 3.15% per transaction.
“The current banking and credit card system redistributes wealth upward, with the middle- and working-class subsidizing credit card rewards for the wealthy,” researcher Alexei Alexandrov said in a statement. His study, funded by the American Culture Foundation, highlights how deeply embedded this problem is in the U.S. payment system. (source article)
How Credit Card Rewards Really Work
Most consumers don’t realize that every time someone swipes a rewards credit card, the associated processing fee helps fund points, cashback, or travel perks. To cover these costs, merchants often increase their prices—so everyone pays more, including customers who use cash or debit cards and don’t receive any rewards.
This means that the wealthiest cardholders, who use high-reward cards for nearly every purchase, effectively get free money, while working-class customers unknowingly foot the bill.
“Credit card swipe fees inflate the prices that consumers pay for groceries and gas,” said U.S. Senator Dick Durbin. “It’s time to inject real competition into the credit card network market, which is dominated by the Visa-Mastercard duopoly.(source article)
The Wealth Gap Behind Every Swipe
The rewards system may seem harmless, but its effects are deeply regressive. Lower-income individuals—those who pay with cash or use debit cards—receive none of the benefits but still pay the same inflated prices. Meanwhile, affluent consumers enjoy luxury travel upgrades, exclusive access, and large cashback bonuses, funded by the very people who can least afford them.
This is known by economists as the “poverty premium” or the “cost of being poor.” In short: the less money you have, the more you pay for basic goods, services, and financial transactions.
Merchants No Longer Have to Absorb Credit Card Fees
Here’s the good news: merchants aren’t powerless. Today, smart business owners are turning to fee-reduction strategies like Cash Discounting, Dual Pricing, and Surcharging to fight back.
These legal, compliant programs allow merchants to:
• Eliminate up to 100% of credit card processing fees
• Offer transparent, fair pricing
• Encourage debit and cash payments
• Increase net profits
By passing credit card costs back to the customer who chooses that payment method, merchants can reduce operating costs while keeping pricing equitable for all.
Want to Stop Overpaying for Credit Card Processing?
The true cost of credit card rewards is hidden—but its impact is real. Small businesses and working-class families are bearing the financial burden, so credit card companies can keep rewarding the wealthy. It’s time for a more transparent, fairer solution.
Interested in reducing or eliminating your card processing fees?
Contact Merchant Industry today to explore tools like Cash Discounting and Dual Pricing — and take back control of your revenue.
