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I get that this is how it works in the real world, but the argument that transaction fees are necessary for the credit company to cover the risk of the cardhold

I get that this is how it works in the real world, but the argument that transaction fees are necessary for the credit company to cover the risk of the cardholder not paying is a bit feeble, because to my non-banker mind: that's what the interest rates are for. If someone is risky, simply don't approve their application, or raise their rate. Am I missing something?

philwelch 7y ago
The 2% that goes back to the credit card company is what ends up paying for all the rewards points and cash back discounts—which work as mechanisms for you to get that money back so long as you actually pay your credit card bills.