The Federal Reserve Bank of Boston has published a Public Policy Discussion Paper entitled “Who Gains and Who Loses from Credit Card Payments? Theory and Calibrations“. From the abstract:
Merchant fees and reward programs generate an implicit monetary transfer to credit card users from non-card (or “cash”) users because merchants generally do not set differential prices for card users to recoup the costs of fees and rewards. On average, each cash-using household pays $151 to card-using households and each card-using household receives $1,482 from cash users every year. Because credit card spending and rewards are positively correlated with household income, the payment instrument transfer also induces a regressive transfer from low-income to high-income households in general.
The paper is authored by Scott Schuh, Oz Shy, and Joanna Stavins.
