How Credit Card Companies Profit off Your Purchases
Channel: Rondi Lambeth
Date: 27/03/2024

Unveiling Credit Card Secrets! 💳💰 Learn why banks offer rewards on credit cards, who foots the bill, and why airline cards are a gold mine for credit card companies. Discover the truth behind those tempting points and rewards! 

Questions Answered:
1. Why do banks offer rewards on credit cards?
-Banks offer rewards on credit cards because they charge the merchant a fee every time the card is used. This fee covers the rewards given to cardholders, incentivizing spending.

2. Who ultimately pays for credit card rewards?
The merchant ultimately pays for credit card rewards. They cover the fees charged by the bank for each transaction, which are often passed on to consumers through higher prices.

3. Why are airline cards not paid for by companies?
Airline cards are not paid for by companies because the revenue generated from credit card fees and rewards often exceeds the value of the airline itself. The credit card company managing the airline card program profits more from the cards than the airline does.

4. How do credit card companies profit from rewards programs? -Credit card companies profit from rewards programs by charging merchants fees for each transaction. They then use a portion of these fees to fund rewards and benefits for cardholders, incentivizing spending.

5. Why should you switch from debit cards ASAP?
-Switching from debit cards is beneficial because using debit cards means you're essentially subsidizing the rewards of credit card users without receiving any benefits yourself. Moving away from debit cards allows you to take advantage of rewards and benefits offered by credit cards.