8 ms·

At a 2% processing fee if you spend 40k a year that's already $800 in revenue for the issuing bank. I don't think that's trivial for a single person.

• ikeboy 10y ago
  You don't get any rewards (1% is standard, plenty already give 2% back)? You also need to take into account the bank's cost of funds, the cost of administering the account, the cost of fraud, cost of disputes (do you ever do a chargeback?)
  • ececconi 10y ago
    I thought the cash equivalent of the rewards are charged to merchants ontop of the fee? Square etc shelter that from their merchants (which partially explains their losses quarter to quarter). The marginal cost of servicing another person when they already have a consumer base of people with debt is very small (close to zero). I'm trying to say it's still profitable, but not where they make the bulk of the revenue.
    • ikeboy 10y ago
      Merchants pay a bit more in fees than banks give in rewards, but definitely not 2% more.
      • ececconi 10y ago
        I think AMEX makes about 65% of its revenue on interchange fees?
        • ikeboy 10y ago
          Amex charges higher fees (many of their cards charge the consumer directly, and their merchant fees are higher) and don't charge interest on many cards (charge cards). Their business model is different.