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

Credit card companies take a percentage of the cost as a processing fee. This is typically 1.5% to 3.5%. Guess which card give 2% cash back…

Also, the business pays a transaction fee to a credit card processor that’s typically a couple of cents or lower per transaction. Also, businesses are prohibited by their credit card agreements from charging a lower price for cash customers. So this fee is spread out across all of the business’s customers.