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Comment by ceejayoz | Hacker News Reader

> “It’s almost like an arms race of who can offer the most rewards,” says Chris Ligan, vice president for acquisitions at Auric, which has seen use of premium cards climb 7% this year. “The person stuck with the bill is the merchant.”

And they pass it on to us.

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I've always thought this fee + cashback thing is weird, because the merchants just add it back to the cost of the item. Sure, you may be getting that cost back as cash, but the merchant charges you the same if you don't have the super elite card. So isn't this just a sneaky underhanded way to tax the poor which obviously don't have credit to get the super elite card?

The intent is not to "tax the poor" though that is effectively an outcome. Rather the intent is for credit card issuers to have a profit potential from short term credit (and to make a given line of credit more attractive for use through rewards).

Maybe smaller places that can't absorb the merchant fees as easily, but big retail places don't usually charge more for using certain credit cards. It'd probably cost them a chunk of business if they did.

Or their merchant account. I think they disallow charging different prices based on the card type - there was a big blowup a few years back because retailers didn't want to pay the higher fees to accept debit cards, but had to because the debit cards had VISA or MasterCard logos and therefore had to be treated the same way as VISA or MasterCard credit cards.

Their prices will be set to absorb the average mix of rewards and non-rewards card that retailer sees. They're certainly not going to consider it a charitable donation to high credit-score folks.

It'd be much fairer if they surcharged rewards cards, or if we went the European approach and capped interchange fees at something reasonable. The current system is basically a regressive tax on people with lower credit scores.

I think what the parent commenter was trying to say is that merchants raise prices on everything, whether you pay with card or cash, to offset credit card fees. What ends up happening is that customers that pay cash are paying for the rewards I get by using a credit card.

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