Billionaire investor Bill Ackman spent his Saturday thinking about credit card rewards programs, and he's not thrilled with what he found. The Pershing Square Capital Management founder took to X to argue that the current system amounts to a reverse Robin Hood scheme where poor people subsidize rich people's vacation points.

How the Subsidy Works

Here's the mechanism: Credit card rewards are funded through merchant discount fees. When you swipe a basic no-frills card, merchants pay around 1.5% to process the transaction. But when someone whips out their platinum or black card, that fee jumps to 3.5% or higher. Those costs get baked into retail prices across the board.

The kicker? Stores charge everyone the same price regardless of how they pay. So if you're using a basic card or no rewards card at all, you're effectively paying an extra 2% premium to fund somebody else's free flights to Cabo. "This doesn't seem right to me," Ackman wrote.

Context: The Rate Cap Controversy

Ackman's critique surfaced as President Donald Trump floated a 10% interest rate cap on credit cards, a proposal that drew unexpected criticism from Sen. Bernie Sanders, who had previously championed similar reforms. Ackman also called Trump's cap idea a mistake.

The observation highlights a structural quirk in consumer finance: millions of lower-income Americans subsidizing affluent cardholders through merchant fees embedded in everyday purchases. Major card networks like Visa Inc. (V) and Mastercard Inc. (MA) operate these tiered reward systems that make the whole arrangement possible.