When the merchant is charged 3% for a credit card use, that gets factored into the price. When you get 1% cash back, you paid for that cash back. You're not receiving redistributions from other people.
> For gas, there's one price for cash, a higher one for credit card.
I never buy gas, so distinct credit vs. debit vs. cash pricing applies to 0% of my monthly spending. No merchant that I frequent offers a discount for debit cards over credit cards (some do offer a cash discount, but that's a different topic).
> Many outfits will give you a discount for cash if you ask. That's even better for you than the cash back. All you gotta do is ask.
Have you actually tried doing that at e.g. a grocery store? An online retailer? An airline?
> Have you actually tried doing that at e.g. a grocery store?
Grocery stores have such thin margins, that isn't going to work.
> An online retailer? An airline?
There's nobody to negotiate with with online sales. Though if you're dealing with an agent at the airport, you can negotiate. Yes, I've done it.
I've successfully negotiated with doctors, dentists, repair shops, department stores, agents selling things, employees, employers, contractors, flea markets, pawn shops, furniture stores, anywhere there's a person with some authority to deal with. Although I haven't, you can also negotiate at restaurants and hotels and car rentals. Usually the higher priced the item, the more negotiation can be done (and is expected).
> Grocery stores have such thin margins, that isn't going to work.
That doesn't make sense. Credit cards cost them some 1-3%; debit cards cost them 0.05%. The difference is exactly the same for high and low margin businesses.
> There's nobody to negotiate with with online sales.
Which makes your proposition to address the problem non-viable for a sizeable proportion of all transactions.
This myth persists even 13 years after federal law in the US explicitly forbid made discounts for cash or debit or ACH or whatever payment legal regardless of merchant agreements with card networks:
>A PCN cannot stop you from offering your customers a discount or another incentive for using a certain method of payment, as long as you offer it to all your customers and disclose the offer clearly and conspicuously. For example, you can offer your customers a discount or a coupon if they pay with cash or a debit card rather than a credit card. But the new rules do not address other PCN restrictions that may prevent you from offering discounts or similar incentives that vary based on the use of a card from a particular issuer or a particular PCN.
Merchants are allowed to charge a lower price for cash or debit card purchases everywhere in the US.
Individually or small business/franchised gas stations will usually have a cash/debit lower price, on east and west coast in my experience. Big company owned gas stations like Walmart, Costco, Kroger, etc will only have 1 price.
The credit card processor for that merchant took into account the mix of reward cards they historically see across all the merchants on the same plan and set that 3% based on that.
If everyone was using a reward card and they all had the same reward percentage you would be right that there is no redistribution.
But because most merchants charge the same price to every credit card user (and often also to cash users) there is a redistribution from those using lower rewards rate cards to those with higher rewards rate cards.
