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This is a deep misunderstanding of interchange - you don't get anywhere close to 2.9% + $0.30 a transaction. First of all, only the online processors even charg
by tommynicholas 11y ago
This is a deep misunderstanding of interchange - you don't get anywhere close to 2.9% + $0.30 a transaction. First of all, only the online processors even charge that, in person it's usually 1.9% ish. Second of all, a cut goes to a bunch of people in the chain.
The money for rewards comes from interest on debt. Capital One made ~10x more on debt than interchange for instance.
- wallflower 11y agoMany years ago, I heard that Capital One's break-even APR interest rate was 9.9%. Any interest charged over that was profit.
- SeoxyS 11y agoIt depends on the business model. CapOne is basically a predatory lender making money off people who can't pay off their debt. Amex makes money from its high value customers and the interchange fees. Amex's fees are higher, and many of their cards are charge cards (which don't even have an interest rate because they must be paid in full every cycle).