Monday, February 28, 2011

Who Is Paying for All These Cash Back Rewards?

   Do you ever wonder who pays for all of the cash back rewards that are paid by the credit card companies?  Well, the answer is - you do!  The credit card companies and issuing banks charge fees to merchants for every credit card transaction, and the fees are based on the type of credit card being swiped.  Rewards cards exact the highest charge.  Of course, merchants try to pass on as much of that cost as the market will bear, and ultimately it is the consumer who is paying in the form of higher prices.  Since you are already paying, wouldn't it be nice to get some of it back?  The above article, written by Eva Norlyk Smith Ph.d., offers a fairly detailed explanation of how the system works, and who is calling the shots.

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