CreditScore.net makes an easy to follow graphic to explain how the credit card companies make money and will help explain how stores justify a portion of their prices.
Credit Card Transactions
- Customer visits the store and spends $10
- Customer swipes the card
- Card reader recognizes the customer and contacts the bank that issued the card
- Customer?s bank send store?s bank $10
- Store?s bank deposits $9.80 into the store?s account.
- A 2% (0.20) fee is split between the two banks.
Depending on the negotiated terms and local regulations the fees can vary from 1%-6%.
Credit card companies make money in other ways too:
- Over the limit, annual, past due and other such fees
- Interest on the balance if not paid in full each month.
- The issuing company makes money every time a card is swiped. Fees range from 1% – 4% per purchase
- The cardholder can make money by selling your name to a mailing list or sending advertisements in your monthly bill. Regulations have made this practice less frequent.
Following is a list of the most popular cards and the interest rate charged.
- Citi Platinum Select Master Card: 11.99-19.99
- Discover More Card: 11.99% – 23.99%
- Capital One VentureOne: 13.90%
- Chase Freedom Visa: 12.99-22.99%
- Capital One No Hassle Cash: 14.9%
Most consumers have a balance at the end of the billing cycle because they only pay the minimum due each month. Subsequently and are charged interest fees as listed above. If you are over the limit or forget to make a payment you are slapped with other punishing fees on top of the fees you already pay. This info graph sheds some light on how our money is used as it shows how our vendors get charged and must pass the costs onto the customers?us. Find more articles like this and more information on the top credit repair companies in the industry on our home page.