The House Cut
The credit card companies get a
percentage of the price of everything paid
with credit cards. Credit card companies
typically get between 8-10% of the final
sale.
If you use a bank card,
The bank whose name is on the card gets
about half the withheld amount and the
bank that the store has its account with
gets the other half. A little something
goes to the Visa or MasterCard association
depending on what kind of card you sue.
Annual Fees
Another big moneymaker for credit card
companies are annual fees. Don't pay
annual fees unless you have to. There are
many credit cards that have
no annual fees.
Yet they provide the same service as the
other cards that do have annual fees.
A variation on the annual
fee scheme that a few banks use is a
transaction fee. Each time you use your
card those banks tack 25 cents or so onto
the amount of the charge. This can quickly
cost more than an annual fee.
It is estimated that some
banks take more than 100 million dollars a
year from annual fees alone.
Interest Rates
The third moneymaker of credit card
issuers is the interest rate, Banks make
unbelievable profits from interest rates.
If you pay your balance
very month within the no-interest period,
you are what the credit card companies
call a free rider. Credit card companies
do not like free riders because they do
not make any money from the account.
