Billionaire investor Bill Ackman raised concerns about credit card rewards programs on Saturday, arguing the current structure unfairly forces low-income consumers to subsidize benefits for wealthy cardholders.
Rewards Programs Create Hidden Cost Transfer
Ackman explained that points and rewards programs function as rebates on purchases, funded through merchant discount fees. These fees range from approximately 1.5% for basic cards without rewards to 3.5% or higher for premium “black” or “platinum” cards, he said.
On the topic of credit cards:
It seems unfair that the points programs that are provided to the high income cardholders are paid for by the low-income cardholders that don't get points or other reward programs with their cards.
Since retailers charge uniform prices regardless of payment method, consumers without rewards cards effectively pay an extra 2% premium to cover benefits for premium cardholders, according to Ackman, who is known for his strategic market-timing investment bets.
“This doesn’t seem right to me,” the Pershing Square Capital Management founder wrote on X.
Broader Credit Card Reform Debate
The comments come as President Donald Trump proposed a 10% credit card interest rate cap, drawing criticism from Sen. Bernie Sanders, who had previously endorsed a similar proposal. Ackman also called it a mistake.
The critique highlights a structural issue in consumer finance where millions of lower-income consumers subsidize affluent cardholders through higher merchant fees built into retail prices.
Major card issuers, including Visa Inc.(NYSE:V) and Mastercard Inc.(NYSE:MA) operate these tiered reward systems.
Photo courtesy: Shutterstock
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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