Credit Cards and the Reverse Robin Hood Fallacy: Do Credit Card Rewards Really Steal from the Poor and Give to the Rich?

News consumers have been treated to a litany of stories in recent years highlighting the purportedly regressive nature of credit-card rewards programs. The coverage centers on a hypothesis about rewards credit cards: that because merchants pay higher interchange fees for credit cards with rewards and then pass those costs on to consumers, it must be the case that users of cash, debit, and non-rewards credit cards effectively subsidize users of rewards credit cards. This hypothesis presumes that users of rewards credit cards tend to be more affluent than those who pay with cash, debit, or non-rewards cards. It is therefore asserted that this arrangement constitutes a transfer of wealth from poorer consumers to more affluent consumers.

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