eli5 How do credit card companies make money out of people that pay their cards in full before the billing cycle and still get rewards?

Question

eli5 How do credit card companies make money out of people that pay their cards in full before the billing cycle and still get rewards?

In: 808

Answer 1

The credit card companies (Visa, Mastercard, Discover, etc.) get a percentage of every transaction plus usually a small fee. This is paid by the merchant. Whether or not you pay off your credit card in full each month is irrelevant to them.

Any interest or fees you pay (late payment fees, balance transfer fees, etc.) go to the bank that issued your credit card.