How Credit Card Companies Make Money

Credit card companies make money in a variety of ways, including:

Interest on outstanding balances: Credit card companies charge interest on balances that are carried over from month to month. This interest is typically the largest source of revenue for credit card companies.

Annual fees: Some credit cards charge an annual fee, which can range from a few dollars to hundreds of dollars, depending on the card.

Foreign transaction fees: Credit card companies often charge a fee when a card is used to make a purchase in a foreign currency.

Late fees: If a credit card payment is not made on time, the cardholder may be charged a late fee.

Balance transfer fees: When a cardholder transfers a balance from one card to another, the credit card company may charge a fee for this service.

Cash advance fees: Credit card companies often charge a fee when a cardholder uses the card to get a cash advance.

Interchange fees: When a credit card is used to make a purchase, the merchant is charged a fee by the credit card company. This fee, known as the interchange fee, is typically a percentage of the purchase amount.

Overall, credit card companies make money by charging fees and interest on balances, and by earning revenue from merchants through interchange fees.