Something for nothing

I am talking about all the credit cards that offer cash back incentives.  You might have one or two in your wallet.  Ever wonder why they are so nice to you and where the money comes from?

Discover was first and they started it more than 20 years ago.  It sounded like a good deal until I “discovered” that merchants paid more for accepting a Discover card than for MasterCard and Visa.

I can testify that merchant rates have accelerated as the rewards system has grown.  People who charge more are paying to get that money back which would be fine, except it doesn’t stop there.

To keep their own bottom line healthy, retail merchants have to adjust their prices when the cost of business goes up.  We all could see it happening when gas prices started to rise precipitously.  I don’t know what things are like where you live, but I have not noticed those increases going away even though gas has come back down.

I can understand the thinking.  First, they have no guarantee it won’t happen again.  Gas prices bounce up and down regularly.  Second, we kept right on buying things like food – what choice did we have?  So, why not keep the extra cash now that transportation costs have decreased again?

The credit card scam is small enough that merchants could swallow the loss for awhile and then raise everything by 5%.  Got that?  Everything you buy, whether you choose to pay for it with a credit card or not, costs you more so credit card companies can entice more customers.

Does that make sense to you?