How Credit Card Companies Make Money
There are a lot of ways credit card companies make money, in this article I will be
going over some of the ways they do that. One of the ways they make most of their money is,
they take a percentage of every item you buy with your credit card. They take anywhere from 2% to 7%
from the merchants. American Express takes the highest and Bank Card takes the lowest from
merchants. Some restaurants and shops in the past have even boycotted using American Express,
because of its high percentage. But American Express came in agreement with them to lower the
amount it takes.
Interest Rates is the second most way credit card makes' money. Whenever you don’t pay off
during the grace period, you end up paying interest on that balance. These interest range anywhere
from 8% to 26%, depending on the card. The bank borrows the money from savers anywhere from
1% to 4%, this allows the credit card to make huge profits.
Annual fees on cards are another way they make money, but most credit cards don’t have
annual fees, unless you have bad credit or no credit then it requires you to pay the annual fees. And
some offer low interest rates, if they do have annual fees. So if you’re paying high interest on your
balances, it might make sense to transfer them to a lower interest card that has annual fee on it. These
fee ranges anywhere from $30-$65 per year. This fee usually covers all credit card advertisements, it
pays for all those credit card mails you get.
Late fees - whenever you don’t pay off your balance within the grace period (which is usually within
20 to 25 days) credit card will charge you a late fee. This is a way for them to make sure you pay on
time, and for them to make profit.
Cash Advance - This allows you to get a hassle free Cash anywhere in the world. This is hassle
free not interest or fee free. There is no grace period for the Cash advance, and you will pay interest, plus
the fee on it right away.
Over limit - Every time you go over your credit limit, they will charge you a fee on that.
