[Justsignedup]

Banks make money from credit cards by

* charging a % from each transaction

* late fees

* interest on balances

This assumes banks make less money on transaction fees than they do on the other two when coupled with the potential for fraud... An interesting assumption...

[ssharp]

Is this how it works? My assumption was that Mastercard, Visa, American Express, and Discover were the ones that made the % of each transaction and then the issuing banks were the ones that made the money from fees and interest.

[dangrossman]

Most of the fees end up back with the card-issuing banks. That's how they pay for the rewards programs, and why the fees are higher for rewards cards than other types.

[nthj]

It's my understanding banks also charge a transaction fee (may be flat per-transaction rather than a percentage.) (Source: I work for an online ticketing company, so we deal with these types of things.)