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"I mean money has to come from somewhere, I assume the tens of millions of credit card holders." No, the money comes from merchants. When you charge something
by rsync 10y ago
"I mean money has to come from somewhere, I assume the tens of millions of credit card holders."
No, the money comes from merchants.
When you charge something at a merchant (the seller) with a rewards card, the merchant pays a higher percentage fee to the card issuer for that transaction.
So when you sell things, and you accept credit cards, there is actually a fairly large variance in cost between different cards that your buyers might use ... it might be quite cheap for you if your buyer used a plain old visa card with no rewards ... and it might be 3-4x that fee if they use some crazy cash rewards super bonus miles card ...
That is where the money comes from.
- robotresearcher 10y agoThe merchant takes this cost into account when setting prices. The money comes from the buyers.
- gozur88 10y agoIt comes from the buyers as a group. But not everyone pays with a credit card, and not every card has the same fee to the merchant.
- keerthiko 10y agoIn that case the cost burden is primarily from the buyers using non-rewards credit cards or cash with those merchants, since they are typically paying the same $ price without getting the utility of the credit card cost factored into whatever they are paying. I guess a lot of people pay the same price for a product or service and don't use every aspect of it.
- robotresearcher 10y agoThat's right. But the merchants tolerate it because the people with high-end cards tend to spend more money per person compared to a bare-bones cardholder. On the miles cards, the merchant hopes to make out by getting larger sales, albeit keeping a smaller percentage.
- prostoalex 10y agoCash has embedded costs as well. Precautions are taken against employee theft or robberies. Somebody with an armored vehicle is also getting paid to drive the cash to the bank at the end of the day and bring enough coins and paper currency in proper denominations so that cashiers can make change the next day.
- vinceguidry 10y agoBy this logic, nobody really pays for anything. The buyers get their money from their jobs, so is it employers that are really paying for miles?