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by ghaff 1295 days ago
Although I'm pretty sure most of the rewards go to people willing to pay for premium cards because they make a lot of transactions. Do the people with free credit cards subsidize them? Maybe but it's not obvious. Of course, the people with the biggest reward cards are probably not paying much interest or late fees either.
1 comments
NavinF 1295 days ago
> Do the people with free credit cards subsidize them?

Depends on the card. Interchange fees are much lower for basic cards so if you get at least 2% cashback, that's break-even. Of course cards with annual fees get a lot more rewards in the form of transferable airline points and have much higher interchange fees to cover that.

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iancarroll 1295 days ago
The interchange fee differences between credit card types are not very high, usually around 0.5%. You can see the public Visa interchange rates at https://usa.visa.com/content/dam/VCOM/download/merchants/vis.... Credit card companies play a lot of games with this too and will “upgrade” your card type if they think it’s worth it, even if you don’t make any changes.

The biggest variances involve non-exempt (Durbin amendment) debit cards.

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NavinF 1295 days ago
Ah I thought the interchange rates would be 1% higher for the best cards, not 0.5% higher

I guess the lowest tier cards really do subsidize the rest.

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