CPA Explains Why Credit Card Points and 2% Cash Back Are Scams on the Public

CPA Explains Why Credit Card Points and 2% Cash Back Are Scams on the Public


Photo by Mikhail Nilov

You know that credit card deal you have? The one with the 2 percent cash back? The one that gives you points on your purchases? Well, as enticing as these perks may seem, certified public accountant Brennan Schlagbaum says the perks are a joke.

Schlagbaum, founder of the finance platform Budgetdog, tweeted, “Credit card points are a joke on 95% of society.”

Credit card points programs are rewards programs that offer a variety of redemption options, including cash back, travel, or merchandise redemptions.

Cash-back credit cards tend to offer users 2 points per dollar on all eligible purchases or 2 percent cash back, Forbes reported.

Others, too, say these credit card perks benefit the wealthy.

The consequence of this reward system is that those who pay with cash or debit cards often end up subsidizing the perks that credit card users enjoy. These cash users are typically from lower-income backgrounds and end up shouldering the cost of the rewards that wealthier credit card users receive. The more extravagant the rewards, the greater the burden on these unsuspecting cash payers.
Credit card perks reward rich Americans to the detriment of the poor. The $200 in cash back you got using your fancy new rewards card often comes at the expense of someone who can’t afford it.

Every time a credit card is swiped, the bank charges a fee. Those fees help pay for rewards like points-funded hotel rooms and cash back. To compensate for the credit card fees, businesses raise prices, and so cash users (who tend to be poorer) are often subsidizing the perks going to credit card users (who tend to be richer), Vox reported.

“The American payment system has evolved into a reverse Robin Hood whereby middle-class and working-class Americans who pay with a debit card, prepaid card, or cash are subsidizing the wealthy, who pay less for everything,” Aaron Klein, a senior fellow in economic studies at the Brookings Institution who has studied and written about this issue extensively, told Vox.

Photo by Mikhail Nilov: https://www.pexels.com/photo/a-woman-using-her-credit-card-online-6969755/