Credit card rewards are accessible, valuable and well-understood by consumers across all income levels, according to a new report released today by the American Bankers Association, which examined the value of rewards cards to merchants and consumers across various income levels and credit score ranges. The study was based on balance-active credit card accounts taken from a nationally representative, depersonalized sample of nearly 40 million open accounts.
The findings counter several frequently made arguments about who benefits from credit card rewards, including that these programs redistribute money from the poor to the rich—an argument often used to support the need for price caps on consumer and merchant fees. ABA’s analysis found, however, that “consumers of all incomes benefit from rewards, and higher-income consumers actually pay a disproportionate share of monthly interest,” while “merchants gain more from credit card rewards than they pay in interchange and other fees.” The association added that “price controls such as interchange or interest rate caps could undermine the structure of the credit card market.”
According to the report, 77% of lower-income cardholders have an active rewards credit card—just a slightly smaller percentage than all cardholders (86%). It also found that rewards card use is more closely related to credit score than income. “In fact, lower-income customers with prime and super-prime credit scores are more likely to have an active rewards card than higher-income subprime cardholders,” ABA said.
In addition, ABA found that income had little bearing on a cardholder’s credit score. “According to Verisk data, nearly one-in-four cardholders with household incomes below $50,000 have a super-prime risk score,” the report noted. “An additional 35% of cardholders in the sample’s lowest income bracket have prime credit ratings. Similarly, interest rates are comparable within risk tiers regardless of income, suggesting that credit card pricing is based on risk, not income.”