The Big Picture
NBC News reports that consumers who pay with cash are indirectly subsidizing the credit card reward points enjoyed by other Americans. This occurs because merchants often pay interchange fees on credit card transactions, which are then factored into the overall cost of goods and services. Consequently, cash-paying customers end up covering a portion of these fees, which helps fund the reward programs offered by credit card companies.
Key Facts
- 1
Consumers paying with cash subsidize credit card reward points.
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Merchants pay interchange fees on credit card transactions.
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These fees are factored into the overall cost of goods and services.
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Cash-paying customers indirectly cover a portion of these fees.
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The fees help fund credit card reward programs.
How Media Is Covering This
1 articleWhy It Matters
Merchants typically pay these interchange fees to credit card companies for each transaction processed. These fees are a cost of doing business for retailers and service providers.
NBC News explains that these costs are often passed on to all customers, regardless of their payment method. Therefore, individuals who pay with cash contribute to the pool of funds that ultimately supports the reward programs offered by credit card issuers. These programs, which include points, miles, and cashback, are funded by the fees merchants pay.
