how do credit card companies make money?
If I pay my balance in full at the end of each month, say its $3,000 on average each month for an entire year( meaning I chalk up $36,000 in transactions annually), how can the credit card company profit from my business?
Credit card companies make money primarily through fees charged to merchants for processing transactions, interest charges on balances carried over from month to month, and other fees charged to cardholders.
Even if you pay your balance in full each month and avoid accruing interest charges, the credit card company still earns revenue from fees charged to the merchants where you make purchases. These fees, known as interchange fees, are typically a percentage of the transaction amount and are paid by the merchant to the credit card issuer every time a card is used for a purchase.
In addition, credit card companies may earn revenue from annual fees, late payment fees, foreign transaction fees, cash advance fees, and other charges that may apply to cardholders.
So, even if you are not paying interest on your balance, the credit card company can still profit from your use of the card through these fees and charges.