“Who Gains and Who Loses from Credit Card Payments? Theory and Calibrations”, 2010-08-31 (; similar):
Merchant fees and reward programs generate an implicit monetary transfer to credit card users from non-card (or “cash”) users because merchants generally do not set differential prices for card users to recoup the costs of fees and rewards.
On average, each cash-using household pays $212.5$1492010 to card-using households and each card-using household receives $1,615.86$1,1332010 from cash users every year.
Because credit card spending and rewards are positively correlated with household income, the payment instrument transfer also induces a regressive transfer from low-income to high-income households in general. On average, and after accounting for rewards paid to households by banks, the lowest-income household ($28,523.52$20,0002010 or less annually) pays $29.95$212010 and the highest-income household ($213,926.42$150,0002010 or more annually) receives $1,069.63$7502010 every year.
We build and calibrate a model of consumer payment choice to compute the effects of merchant fees and card rewards on consumer welfare. Reducing merchant fees and card rewards would likely increase consumer welfare.