Good credit card customers don’t make money for the likes of JPMorgan Chase and Bank of America. They take money. If you’re like me, you rack up tons of points on your card, pay it off in full each month and never pay a cent in interest. Meanwhile, you fly across the country first class on your rewards and get cash back on almost every purchase.

So, who’s paying for your free rides? It’s sure as hell not Ken Lewis and Jamie Dimon. It’s Joe Sixpack and Sally Can’t-Pay-My-Rent. They are the ones who “buy now, pay later” out of necessity and they are the ones who end up paying the finance charges and late fees and penalties that fill the coffers of the card companies. It’s an interesting system – but all of that might change, depending on how some key credit card bills pan out.

There’s a lot of debate brewing about which fees are fair and ethical. Obviously, nobody likes to lose fistfuls of cash in “convenience” and “service” charges. But some of them make sense. Why shouldn’t you be penalized for spending more money than you have? But then again, could our insatiable hunger for perks and rewards be driving card issuers to resort to desperate measures in order to turn a profit even after shelling out freebies? Consider these three ways that the minority of consumers are subsidizing the benefits of the majority of cardholders. Let us know what you think is fair in the comments section below.

Interchange Fees

When you swipe your card at the register, the card issuer gets a cut of the total sale in order to cover the costs of zapping money back and forth electronically between you and the merchant (interchange fees). Makes sense, right? It’s a convenience charge. It’s just like Pizza Hut might tack on a $1.50 delivery charge (that’s not including the tip) when a customer opts to have the pizza brought right to their door.

But wait – it’s not like that. Because merchants are not allowed to add a surcharge to cover the cost of interchange fees. So, the guy that pays with cash pays the same price as the person who whips out plastic – even though the merchant gets less money for the latter transaction. In a sense, it’s almost as if the carryout customers at Pizza Hut were required, by law, to pay the same price as those enjoying the convenience of delivery.

Now, this metaphor’s a bit shaky, but if you were to pretend that the Pizza Hut delivery driver was not an employee and were instead some kind of freelance food delivery person, you can see where this law would be advantageous for him. From a customer’s viewpoint, there’s no reason not to take advantage of the convenience of delivery – but it eats into the restaurant’s profits. The real winner is the delivery driver.

But then again, there are restaurants that willingly eat the cost by offering free delivery because they believe that it will promote business by offering customer convenience. So, shouldn’t the owner of a 7-Eleven franchise feel the same way? After all, they don’t tack on a surcharge for customers who choose to use the bathroom – which, again, is a convenience that not every customer takes advantage of. Or is it unfair to mandate through credit card agreements and/or state laws that paper and plastic have the same price tag? Discuss.

Further reading:  New York Times op-ed: Rich and Poor Should Pay Same Price.

High Interest Rates

The higher your credit rating, the lower your interest rate. It makes sense – it’s all a numbers game after all. Lenders can afford to take a bigger gamble on someone with a decent track record because it’s a good bet that they’ll pay their dues. But if someone has a history of dropping the ball, it’s best to extract as much money from them as quickly as possible while they still have it (or so I imagine the rationale goes).

No doubt, so-called “bad credit” credit cards are a big moneymaker for the card issuers. Credit cards for those with bad credit often have some of the worst interest rates on the planet as well as annual fees and sometimes prepayments or collaterals (secured credit cards). If we see an end to this type of high fee, high interest rate card, we might all see annual fees on our credit cards (see: Bank of America adds annual fees) instead of just the untrustworthy borrowers.

And shouldn’t it be that way? Why go to such lengths to make the poor poorer for the benefit of those who could obviously afford an extra $29 a year? Or should these irresponsible cardholders pay the price for borrowing more than they can afford? Discuss.

Penalties and Fees

There’s sort of a seesaw effect going on when it comes to credit cards. When things are good, they are really good – the rewards start rolling in and they keep on rolling. You are rewarded with more cash back, better rewards, more perks and lower interest rates. Meanwhile, if you temporarily lose your footing with your credit card payments, it can quickly spiral out of control.

Here’s a scenario:

You get a “bad credit” credit card with crappy rates to go with your crappy credit score and because you have almost no money you max it out with high interest debt, such as cash advance and balance transfers, and start racking up finance charges. Then, because you’re maxed out, you incur “over-the-limit” fees. You can’t make the payment then you get nailed with delinquency fees and a sky-high default rate.

Or maybe you have a debit card and the bank rearranged your transactions so you ended up incurring multiple overdraft fees, which triggered your overdraft protection, that you didn’t even know you signed up for.

When these delinquent cash cows fall out of the money tree and hit every penalty on the way down, you get a free golf vacation package. But now that the downtrodden are ticked and the legislators are ticked on their behalf, there’s sure to be tighter restrictions on these nickel-and-dime tactics. (See: Fed’s new rule on overdraft fees and, of course, the CARD Act). Result? You’ll have to start paying for your own first class upgrade. In fact, we’ve already seen credit card rewards starting to get less and less attractive.

Is this a more realistic situation? Is this more fair and equitable? Or do you think you deserve extra perks just because you can pay your bill on time? Discuss.

Credit card companies have long argued that tighter restrictions will lead to an end to the handout party. When lobbying for a level playing field, it’s important to remember that the majority of us currently stand astride the high ground.

So, what’s your opinion? Should we “spread the wealth around” as well as the fees? Or do you prefer a system that uses the sins of the delinquent to finance rewards for the well behaved?

Discuss in the comments.

Cartoon by HikingArtist.com.

Related posts:

1. 5 Ways to Talk Your Way Into Getting Better Credit Card Rates
2. 8 Convenience Items We Pay More For
3. Why paying the minimum due is a bad idea
4. Why Should You Keep Paying Your Mortgage?
5. 6 ways to abuse your card