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Credit card rewards programs are often framed as the poor subsidizing the rich.

That’s because in addition to merchant processing fees, credit card companies fund those rewards using the interest and late fees paid by credit card users. The assumption is that the poor are more likely to carry a balance, pay more in interest, and ultimately pay for the rewards earned by the rich.

But a new study from the US Federal Reserve finds this reasoning is “at best incomplete.” It turns out, according to the study, that rewards programs simply benefit sensible consumers, regardless of their income.

The researchers found that the benefits of rewards cards often go to those with the best credit scores. Credit scores are essentially a measure how responsible someone is at borrowing and then repaying on time to avoid interest — not of someone’s income level or wealth.

The study found that users with higher credit scores tend to spend more money and, as a result, earn higher rewards for things like airline miles, gift cards, and cash back. They usually pay back their balances on time, which means they pay less in interest. On the other hand, people with lower credit scores typically pay more in interest because they often keep outstanding balances on their rewards cards for longer.

Altogether, the researchers estimated that $15 billion is redistributed from those with lower credit scores to those with higher scores every year.

The researchers used comprehensive US credit card data, which details monthly account-level information like self-reported income and zip codes. The study had some limitations. The researchers were not able to look at all the credit cards a consumer holds and the data doesn’t show when someone lost a job or had another life event that might affect their credit card usage.

So who benefits the most from credit card reward programs?

Notably, the study’s results were not driven by income.

Consumers with high credit scores and high incomes benefit the most from reward cards. But they do so at the expense of consumers with low credit scores and high incomes, as opposed to those with low credit scores and low incomes, the study found.

The researchers instead analyzed the “financial sophistication” of an individual. They did this by looking at how likely it is that a consumer will make some sort of financial mistake when managing their personal finances — for instance, how good they are at paying back what they borrow.

“Generally, richer people tend to be more sophisticated, but it’s not a very strong correlation. In general, in people’s minds, it tends to be like a sort of a one-to-one match between the two—very rich and very sophisticated, and it’s not,” said Andrea Filippo Presbitero, an economist at the International Monetary Fund and co-author of the study.

The authors found that reward cards induce over-borrowing, and that this effect is confined to unsophisticated users. Among this group, the researchers found that after a credit limit increase, spending goes up, but the repayments do not. This signals that they are spending beyond their means, Presbitero said.

Reward credit cards, which date back to the 1980s, first started out as cards for the affluent. But they are now a ubiquitous feature in the US, Canada, Australia, and the UK. In 2019, rewards cards accounted for about 60% of all new credit cards in the US, with the largest US banks paying out $35 billion worth of rewards—using the interest and late payments of the less savvy among us.

This article was written by Michelle Cheng from Quartz and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to [email protected].