2 ms·
It's not subsidized by people who make interest payments?
by jimmaswell 8y ago
It's not subsidized by people who make interest payments?
- cycrutchfield 8y agoOh, it is. Very much so.
- ThrustVectoring 8y agoInterest payments cover the fixed costs of running a credit card system (and then some). Payroll, marketing, offices, return on capital, etc. An additional marginal purchase usually generates enough in interchange fees to cover the rewards earned on it.
- ThrustVectoring 8y agoNot really. Banks really dislike creating systems where it is possible for them to lose money. And by law, if you pay your credit card statement in full on or before the due date, you get charged zero interest. The interchange fees charged to merchants roughly covers rewards. It's why Visa et al charge higher fees to merchants for processing higher-tier rewards cards. Interchange fees don't cover all the other overhead of running a credit card system, but they do cover rewards.
- oasisbob 8y agoIt's really going to depend on the bank and what their business model is. eg, free consumer checking accounts have been heavily subsidized by interchange fees for years. There are more dollars in interchange fees collected in the US every year than there are dollars of fraudulent transactions.