Credit card widening the divide between haves and have-nots?

CREDIT CARD use seems to be widening the gap between the rich and poor, based on results of a study conducted by the Federal Reserve Bank of Boston.

According to a Reuters report by Kristina Cooke, “Credit Card Fees Transfer Wealth to Rich, Study Finds,” credit card use acted “as a transfer of wealth from poor to rich.” It was noted that merchants usually did not charge different prices for card users to cover costs of fees and rewards but they marked up prices for all consumers.

As a result, the researchers said, people who paid cash and were often of lower income ended up “subsidizing those who pay by credit card.” The researchers said high-income consumers were also most likely to receive rewards and freebies. No surprise there, really, as high-income consumers use their cards more often and for costly items.

The Reuters report quoted researchers Scott Schuh, Oz Shy and Joanna Stavins as saying that the use of credit cards involved merchant fees, retail price increases, resulting in a nontrivial transfer of income from cash to card payers, which most card users did not know about.

The researchers also found that about 83 percent of banks’ revenue from credit card fees came from people who paid cash, usually low-income buyers. The researchers suggested, according to the news report, that reducing card rewards and merchant fees “would likely increase consumer welfare.”

SM responds

A few weeks ago, somebody forwarded an e-mail alleging cheating in SM and Savemore branches. And, as with most e-mail these days, people are still forwarding to me the same message.

The person who originally sent out the e-mail complained about discrepancies in prices—tags did not match costs encoded in cash machines, so she paid more for her purchases.

I did my own forwarding of the message to Millie Dizon of the SM group for comment and/or action, who forwarded the same to those in charge of the department store and supermarket group. I am happy to report that the issue has been addressed and the original sender reassured, so people can stop forwarding the message.

Both department store and supermarket people contacted the source of the e-mail, a Ms. Olivares, and assured her they were constantly updating price tags to ensure they matched those in the cash register. “We have also been doing regular checking and monitoring of the display alignment, completeness and correctness of the shelf tags,” Bang Manalad, operations head for the supermarket group, said.

Manalad thanked the customer for calling their attention to the problem so it could be addressed and service could be further improved.

On her part, Millie said the whole SM chain was doing its best to minimize the problem of price discrepancies despite the difficulty, especially in the supermarket where prices of products could change very quickly.

She added that in instances when two prices were listed for one item, the company policy was to charge the customer the lower price. –Linda B. Bolido, Philippine Daily Inquirer

Send letters to The Consumer, Lifestyle Section, Philippine Daily Inquirer, 1098 Chino Roces Ave. cor. Mascardo and Yague Sts., 1204 Makati City; fax 8974793/94; or e-mail lbolido@inquirer.com.ph.