This is not an argument from authority (though I would in fact give some credence to a domain expert with a demonstrated reputation for diligence and accuracy, here). This is an argument backed by evidence refuting an article not supported by evidence.
(Also, the argument is not "credit cards are fair". The argument is "credit card reward programs are not a subsidy of the rich by the poor".)
> And Twitter doesn’t show threads unless you’re logged in btw, so you just linked Patrick’s opinion.
Fair point, thank you.
Some highlights of the thread, assuming that each directly linked tweet can be loaded:
Patrick’s argument is flawed because it assumes that if the interchange fee pays more than the cost of providing benefits, then it’s not a “subsidy”.
This is false because the interchange fees, and in fact all of the fees, have to pay for the entire company’s operations, not just for your points program. Without more detailed data it’s not possible to rule out the possibility that points programs are a subsidy for the rich.
The second assumption he makes is that volume is the same across the board. It’s not, there’s way more customers on the lower end, and the company charges them even more fees. So sure, rich customers individually pay more interchange fees, but the company could still be making most of its money from poor customers.
Unfortunately without knowing the CC company internals we have no way of knowing. Which means that Patrick’s opinion while being an educated guess is still just a guess, so it doesn’t refute anything.
> This is false because the interchange fees, and in fact all of the fees, have to pay for the entire company’s operations, not just for your points program.
Sure. But the default and reasonable presumption is that at that scale, companies do things because they're profitable; in this case, they implement rewards programs because they make more money by doing so. In particular, the default and reasonable presumption is that companies don't spend more money acquiring a class of customers than they expect to make from those customers. The claim by the Atlantic article is that credit card companies lose money on the rewards programs for rich people. There's no evidence of that, and some evidence to the contrary.
> Without more detailed data it’s not possible to rule out the possibility that points programs are a subsidy for the rich.
That's not where the burden of proof lies. Without more detailed data it's not possible to demonstrate that rewards programs are a subsidy. The conclusion is not presumptively valid.
I'm not suggesting, either, that the argument from the linked Twitter thread is ironclad, just that it's compelling evidence against.
> The second assumption he makes is that volume is the same across the board. It’s not, there’s way more customers on the lower end, and the company charges them even more fees. So sure, rich customers individually pay more interchange fees, but the company could still be making most of its money from poor customers.
"more customers on the lower end" is in fact refuted by the data; see figure 2 (F) in the linked paper.
"making most of its money from poor customers" might be true, but note that figure 2 (E) is scaled by "percentage of average daily balance", and if you were to view it in absolute terms, it seems less likely to be true. Even if it were true, though, it's not evidence of a subsidy of rich customers by poor customers. The credit card companies very obviously think that rich customers are profitable to acquire and keep, or they wouldn't pursue them so heavily. The evidence from the thread supports that claim.
The argument being made in the thread is, precisely, if the rewards program pays for itself an individual customer, that customer is not being subsidized in any way.
If you want to claim that the rewards programs offered to richer customers aren't in fact profitable for the credit card companies, that seems like an even more extraordinary claim, and not one that seems to have supporting evidence.
Alternatively, if you want to define "subsidy" so broadly that any business making more money from one group of customers than another is having one group of customers subsidize the other, even if they are making money from both, then I'd question your definitions and use of evocative terminology. They're spending money to get a group of customers, and if they're spending more to get those customers than they make from those customers, they wouldn't spend it in the first place; if they're spending less to get those customers than they make from those customers, then those customers are not being subsidized.
(Also, the argument is not "credit cards are fair". The argument is "credit card reward programs are not a subsidy of the rich by the poor".)
> And Twitter doesn’t show threads unless you’re logged in btw, so you just linked Patrick’s opinion.
Fair point, thank you.
Some highlights of the thread, assuming that each directly linked tweet can be loaded:
Citation for people with more money spending more: https://x.com/patio11/status/1902556736956903589 (linking to https://www.bls.gov/cex/tables.htm ).
The rich are paying far more of the "payment system overhead" of merchants than the poor are: https://x.com/patio11/status/1902556925826416841 and https://x.com/patio11/status/1902557078222176449 and https://x.com/patio11/status/1902557151807119735 and https://x.com/patio11/status/1902557413275775295
Identifying the key question: https://x.com/patio11/status/1902557654603415768 and https://x.com/patio11/status/1902557795800498477
Quoting and questioning the Atlantic's claim that rewards programs aren't funded by interchange: https://x.com/patio11/status/1902558008283992313 and https://x.com/patio11/status/1902558055310434325
Citation refuting this: https://x.com/patio11/status/1902558157169152158
Quoting relevant charts and data from the citation: https://x.com/patio11/status/1902558268070711311 and https://x.com/patio11/status/1902558360530002094
Claim (not specifically citation-backed) that in fact one group getting a subsidy is lower-income consumers during macroeconomic shocks: https://x.com/patio11/status/1902559088631771397 and https://x.com/patio11/status/1902559166729802088
Observation that while wealthier people get higher-reward cards supported by interchange, poorer people get free checking supported by interchange: https://x.com/patio11/status/1902559216214134798 and https://x.com/patio11/status/1902559349655982387 and https://x.com/patio11/status/1902559372758155325 and https://x.com/patio11/status/1902559469470412913
Refutation of another part of the Atlantic article (article claims credit-card companies "make lucrative deals with airlines and hotel chains", but credit card companies pay for those deals, not the other way around): https://x.com/patio11/status/1902559896400203987 and https://x.com/patio11/status/1902560051644002726 and https://x.com/patio11/status/1902560160632963217 and https://x.com/patio11/status/1902560257282335024 and https://x.com/patio11/status/1902560386395545603 .