The rewards may be real, but so are the cost increases the merchants gradually put in place to offset them.

We can’t pay merchants less by paying cash, so we may as well try to grab a slice of the fee via the reward. 2% sounds pretty good.

Some local merchants offer bonuses for cash usage. Of course, those only take Debit cards if not cash.

For those of us who use credit cards with rewards, the rewards significantly exceed the price increases, because most of the price increases are paid by people using other payment methods.

They're mostly paid by people who carry a balance and incur interest payments. They fuel the rewards programs.

I'm sure interest revenue plays a role in determining the rewards that are offered, but the data suggest that merchant fees, which are largely paid for by non-credit-card-using households in the form of higher prices, are a bigger contributor. The average credit-card-using household receives a net transfer of over $1,000/year from non-credit-card-using households [0] (2010).

[0] https://www.bostonfed.org/publications/public-policy-discuss...

The way I see it, every customers who do not pay their card in full or who don't use credit cards subsidize my travels. It's honestly an extremely good deal for me and even if I pay 2.2% of every transactions, it's more than worth it for me.

I never would be able to pay for as many long haul first class flights if I saved 2.2% of the transactions and used that to buy tickets

It's like a vig the retailers pay to participate, where part of that is split with the consumers.

The rewards are real -- believe me, I take advantage of them too -- but we're paying for them by the inflation caused on consumer goods by everyone using credit cards.

It's true that you pay the inflation regardless of whether you use a card or not, though. And you only get the reward if you do use a card.