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Additional Details
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Shamsher K | How the credit card companies earn money?i mean like visa,mastercard.apart from yearly fees which is small? |
do they earn from the transactions we make by the card? |
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FinanceMan
 |
The 'myth' of Credit Card Cos. will burst if we answer here.
But who cares ....?
( Globally it is believed that these Cos. were delaying the launch of "Debit Cards" to spread the 'credit' variety in the masses )
See how they earn their revenues :
- Enrolling and charging the vendors of shops in the card system
- Taking a percentage, 3- 5 % of the sales
- Annual fees both from the card holders and the traders
- Unwanted Insurance fees, in some cases
- Late payment fees
- Interest on credits .. often out of the way ..(!)
- Other incidental charges
- Etc. ... who knows the names ... amount ... ?
( People dealing with cards : Enjoy debit cards but not the crdit cards ) |
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glenn w
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Credit Card companies charge the retaillers a fee for each transaction they process. The fee can vary between 3% and 5%of the amount of the bill. I have often saved money by asking the retailer to deduct this amount from my bill if I pay cash. It works! |
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Classy Granny
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I don't know why Chriss32 got a thumbs down because she is actually right. They make most of their money on the interest they charge us. Depending on your rate, if you send they a payment of a $100, only $60 or so goes to reducing your debt. The balance goes to the credit card company. |
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ZCT
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They make money all kinds of ways.
They charge the merchant for every transaction they process. This could be between 1-3%. That's a lot of money right there.
They also offer other kinds of services to merchants that they charge for.
Then they charge interest to the card holders, and all kinds of outrageous fees, like $39 if you go over your limit, things like that. Credit card companies make millions of dollars in fees and charges every year.
It's a wonderful racket and they make plenty of money. |
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MBATXguy
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Credit card companies earn money in a variety of ways...
Every credit card company utilizes a % fee schedule to decide how much to charge + an additional transaction fee..
For VISA/MC the charge is usually anywhere from .5% - 4% (depending on the agreement signed with the company).. However, these companies will charge anywhere from .01 - $1.50 per transaction in addition to the percentages.. Why? Because, when you and I do a small $3 or $4 purchase, the credit card company's return would be negative.. Thus, they have to put a fee in their to at least hit their break even + profit point..
For consumers, the card companies are extensions of a financial institution.. They can borrow money at the discount rate with the Fed which is now around 3.5 -4 %.. Some banks were even able to take advantage of auctions which allowed some to receive funds at 3%.. Anything which they charge above that rate is what they call a spread.. This is their true profit off any sale.. The industry has lately turned to a trend to raise your rates at any point and time because of changes to your credit score, your spending habits, etc...
In some cases, people have watched their rates go from 7% to 30%... This takes the cost of their money up nearly 2% per month.. Now, when we go and purchase items on our visa/mc check cards, the merchants are also paying a fee on each transaction (under their agreement for using their logo).. It is much lower, but a fee is still required.. The fees are also something which come into play.. They have been known to charge an over limit and late fee every month easily adding hundreds of dollars to your bill over time..
As for American Express and Discover, their fees and %'s are much higher up to 6% per transaction (+ transaction fee).... They are the same way as the others..
Hope that helps.. |
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src50
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Visa and Mastercard themselves profit from transaction fees on card use. It is the banks that issue the cards that profit from interest and card fees. |
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Lois_G
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I think the late fees probably pay a huge roll. I got a $40 late fee once. Imagine all the people who are late on their credit cards. I'm sure the companies bet on a certain amount of late fees every year. |
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Yoda's Duck
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Do you have a credit card?....
Have you looked at the bill?....
Check out that interest rate!
Now, do a little math. Whatever balance you currently have- if you were to make the minimum payments, figure out how long it would take to pay it off.... add up the total amount you would pay, and compare that total to what your current balance is....
Yup, that's where the money is! |
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misledpunkieduckie
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They make money from their annual fees, interest they charge, money from company you use your card with as they charge vendors a percentage to accept there cards, and also they get a percentage from the transaction. |
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BigD
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The bulk of their earnings comes from the interest that they charge the cardholder |
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La Vie Boheme
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From the interest. |
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konablacktraveler
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yes they make apercentage of the gross sales from the merchant |
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Chriss32
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Well, they earn money from the interest they charge and yes, evertime a credit card is used at a store, the store is charged a fee from the credit card company. |
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mubashar
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100% not clear. Its vague. But an effort. |
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