
Key Takeaways
- New research finds that America's lower 80% percentile pays credit card fees of $300–$500 in excess of what it receives in rewards, but high earners win out.
- Higher-income transactors earn rewards without paying interest or fees, while lower-income revolvers carry debt and bear the costs.
- Economist Alexei Alexandrov calls for fintech competition, installment loans, and financial education as policy remedies.
A recent study by economist Alexei Alexandrov sheds light on something many in consumer finance have suspected: Middle- and working-class credit card users subsidize credit card rewards for the wealthy in the current banking and credit card system.
Using a February 2025 phone survey and national data sets, Alexandrov found that the bottom 80% of families pay hundreds in credit card and bank fees but get back much less in return — subsidizing affluent Americans using the network.
“The current banking and credit card system redistributes wealth upward, with the middle- and working-class subsidizing credit card rewards for the wealthy,” Alexandrov explained in his report.
His study found that the typical highest earner gets about $100 in annual rewards after fees, but a whopping majority of households pay between $300 and $500 more than they receive.

That net drain is just for starters. Lower- and moderate-income households also pay disproportionately for bank fees for overdrafts and maintenance fees.
Even if they avoid direct fees, they pay in stealthy transaction costs of about $1,000 a year — costs that merchants discreetly pass along to everyone to make up for credit card processing. Higher-income folk use cards and get rewarded; others use debit or cash and pay just the same.
Alexandrov said he was not astounded to see the general trend, but was interested in seeing that it segregated Americans into two credit card segments.
“You have transactors who do rewards with their cards and do not pay any interest,” he said. “Then there are others who rotate balances, give up on their rewards, and have massive fees. It’s essentially two different financial instruments for two different Americas.”
How Fee Structures Make Wealth Inequities Grow Wider
As he detailed in an interview, fee discrimination extends well beyond credit card interest. Debit-holding families also pay overdraft fees, late fees, and maintenance fees with a much larger margin than richer transactors. In comparison, these families do not have access to high-interest savings or high-grade card benefits.
More than one-third of these families said they had less than $1,000 in emergency savings, and 14% reported less than $100. “If just a small percentage of these fees could be retained instead,” Alexandrov said, “it would classify a household as a high-saver in just a few years.”
On top of that come transaction fees. Most merchants simply pass credit card processing fees to all of their customers through universal price increases. That creates what Alexandrov calls a “stealth subsidy,” with cash and debit card users unknowingly footing the bill for rewards for credit card users.
Policy Proposals That Address Root Cause
The study advocates several pragmatic reforms to achieve a level playing field.
To begin with, Alexandrov advocates for encouraging fintech ventures and non-bank business models that can offer low-cost services with zero brick-and-mortar expenses. These new players, he argues, have the capability of providing checking and savings accounts that do not rely on fee-intensive business models.
He also calls for expanded use of installment-type credit products like buy now, pay later (BNPL) products. Unlike regular credit cards with revolving lines of credit and compounding interest, installment loans have fixed terms of payment and can reduce debt burden in the long run — when borrowed responsibly.
“BNPL will not be viable for all,” said Alexandrov, “but for consumers who pay off in full each month, fees can be significantly lower than revolving credit card debt.”
He noted that credit card companies have already begun to add BNPL-type features, for instance, payments in installments for high-ticket purchases, as a response to increasing demand.
A Call for Smarter Consumer Education
Perhaps most persuasively of all of the report’s findings is related to consumer awareness — or lack thereof.
Financial literacy classes can keep working families from falling into the trap of credit card debt and fees.
By Alexandrov’s description, many households underreport credit card debt and fees in significant measure because of misconceptions about how fees are assembled or because partners share financial responsibilities.
“There’s a disconnect between what people think they owe and what they do owe,” he said. That disconnect makes it harder for consumers to make logical decisions about things like consolidation loans or refinancings.
As a countermeasure, Alexandrov proposes that personal finance become a regular high school course offering.
Instruction in fees, credit reporting, and scores, and installment credit in high schools would, he feels, help to circumvent ill-advised financial decisions in the future. “We have 17-year-olds committing to $200,000 of student loan debt without fully understanding the ultimate repercussions,” he said.
Systemic Change Is Rooted in Transparency
The report concludes with a call for greater transparency and competition in the financial system.
Alexandrov advocates merchant discounts for payments with debit cards or cash and the expanded use of pay-by-bank systems that allow direct payments from consumer bank accounts. These tools have the promise to reshape incentives and inject fairer pricing models.
“These reforms are designed to foster competition, transparency, and fairness,” said Alexandrov. “Practical steps can make the financial system less regressive, helping households build savings and stability instead of eroding them.”
The findings provide new momentum to a perennial policy discussion over credit availability and affordability. Today’s financial system may tilt the scales toward the wealthy — but with the right reforms, households starting from scratch can still find a path to stability and savings.