Rewards programs on higher-end credit cards may be costing other people money.Retailers like Amazon and Target are actually suing to be able to be more selective about which credit cards they accept. Higher-end cards that offer rewards like points and cash back lead to higher transaction fees that have to be paid by the merchant, which in turn leads to the merchant charging higher prices. If they win their suit, it could lead to a price decrease for other consumers.

Rewards cards have become more popular (unsurprising--who doesn't love the idea of earning money by spending money?), and so companies have been paying these extra fees more often. Their argument against this is that the "accept-all-cards" policy imposed by the credit card companies discourages competition, because banks won't have to offer lower interchange fees on their cards. The credit card companies rebuttal: it's more convenient for the consumer and gives them more of a choice in regard to which card they want to use. Plus, again, who doesn't love getting rewarded for spending money?

It's unlikely that rewards programs will disappear completely as a result of this suit, but rather that retailers will be able to negotiate the prices they pay to be significantly lower. Could these reduced rewards mean in lower prices for the average shopper? Only time will tell, but it's unlikely that all the savings will result in lower prices (then again, not all the money paid by retailers to banks showed up as rewards points to cardholders). It seems to me that these rewards programs have proven too good to be true.

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