Well, if you don't have a credit card, you probably find yourself sometimes thinking if you should get one. You're probably caught between anticipating the joy of being able to buy something even if you don't have the cash, or worrying that you will find yourself in a situation where it will be hard for you to pay off your credit.
Well, Scott Schuh, Oz Shy and Joanna Stavins of the Federal Reserve Bank of Boston may be suggesting that you're better off getting the credit card.
In their paper "Who Gains and Who Loses from Credit Card Payments? Theory and Calibrations," there is actually an implicit money transfer from non-card users to card users because merchants cannot recoup discounts for credit card reward programs from card holders, and instead, take it from non-card users. They say on the average, "each cash-using household pays $151 to card-using households and each card-using household receives $1,482 from cash users every year."
It does make sense, and there's nothing really non-card users can do about it. I mean, except for not buying the goods these merchants are selling. But then again, it's a cost and benefit decision on the part of the merchants: is the benefit of gaining credit card purchases (which is more likely than not, from richer people) outweigh the cost of losing purchases from non-card holders?
It can also be economies of scale, particularly when you consider how these merchants will promote their product. If they target credit card holders, they can "join forces" with the credit card companies (and sometimes, other merchants too) in reaching out to credit card users. If they target non-card users, they would end up doing all the promotion on their own.
Seems unfair, huh? Well, you would think Schuh and the team is out to promote credit card use, but of course they're not. They're pure economists. And the solution they're suggesting? Reduce merchant fees and card rewards, and this would increase consumer welfare. So the card companies have to think of other ways of making their product more competitive and attractive.