As title suggests, how do these companies make money? Thanks
In: Economics
Credit card companies charge merchants a percentage of every transaction as a fee, usually something like 3%. So if a purchase with a credit card is $100, the merchant has to pay the credit card company $3. Merchants aren’t super happy about this, obviously, so they have to raise prices a bit to compensate for their losses, but the convenience is generally worth it, and you’re cutting yourself off from a lot of customers if you don’t accept credit cards.
Also, credit cards have insanely high interest rates, so if you don’t pay your credit card bill off every month, you’re going to instantly start accruing interest on your debt, and a lot of it. This earns them money too.
They charge a small amount for every transaction and also charge for the company’s ability to use the services
For every dollar you spend using a Visa/MasterCard/American Express/Discover/etc, they take $0.01-0.03. The bank that issued the credit card also takes a few cents too. The credit card processor that the merchant contracted with to provide the card readers and service the connection to Visa, also take a few cents.
they take a commission on every payment made through them. there are also card issuance fees.
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