May 20, 2023I
t was click bait from the most unlikely of sources: Earlier this year, a group of academic and government researchers from the National University of Singapore and the International Monetary Fund (with support from an economist at the Federal Reserve Board), undertook a study of the U.S. credit card rewards market.
Provocatively titled, “Who Pays for Your Rewards? Redistribution of the Credit Card Market,” the report’s findings were so specious and flawed the banking industry barely gave it a glance.
Unfortunately this “academic” dirge has now been cited in numerous media outlets, including the Wall Street Journal. It is also cited by proponents of the deceptively titled Credit Card Competiton Act, a bill championed by Senator Dick Durbin, D-Ill., and Big Box retailers that would severely restrict the interchange that manages credit card transactions. Such restrictions would result in a windfall for retailers at the expense of consumers’ card benefits.
ecall that Durbin passed similar legislation on debit cards in 2010 as part of the massive Dodd-Frank regulation bill. Retailers promised lower prices, which study after study has shown never materialized. Instead, consumer saw the extinction of debit card rewards, the demise of free checking offering, or lost access to their accounts entirely.
Of course, retailers, eager to once again pad their bottom lines, cheer the report’s utter nonsense in a further threat to consumer benefits.
The report itself is dripping with academic elitism, dubbing consumers who carry a balance on their credit cards (“revolvers” in industry parlance) as “naïve” and “unsophisticated,” and claiming their “financial mistakes” are made out of “ignorance.”
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