Whoa. Banks make a ton of money from interchange fees.

[Razeus]

I was reading up on fees and how this cc companies are paying for all these cash rewards/points.

So for a example, a $100 charge creates, assuming a 2% swipe fee a $2 fee of which, the bank keeps $1.75, VISA/MC/AMEX/DISC get $.20, and the rest goes to the other bank on the merchant side.

No wonder people are always ragging on banks.  And here I was thinking banks don't make money off of me because I don't pay interest.

[jsucool76]

Banks will always find a way to make money, don't worry about them  

[Razeus]

My math isn't adding up.  How can they give 5% cash back when only collection 2-3% swipe fees?  Are they banking on most people to pay interest?

[alboto]

plus there is a really small % of people that PIF each month compared to the ones that accrue interest over the months and years.

[Revelate]

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@Razeus wrote:

My math isn't adding up.  How can they give 5% cash back when only collection 2-3% swipe fees?  Are they banking on most people to pay interest?

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Couple of things I think might be the difference:

• Rewards cards currently have higher swipe charges than no-frills ones.
• They are expecting some folks to carry balances, you may not, but they look at their customer base in aggregate.  
• More and more are offering preferential treatment to folks with depository accounts (Chase / BOFA recently, 10/10 Chase, the bonus rewards for redeeming into BOFA account for them), having more money in the bank directly affects how much they can lend out for additional profit opportunities.
• Annual fees, not everyone either chases non-AF cards exclusively, or meets the spend requirements to offset the AF.  Humans are often bad at math

 Edit: trying to make this easier to read

[flowfaster]

The local liqueur store guy tries to charge me a dollar extra to use my BCP there (classified as grocery).  I asked him why and he said Amex rapes him with a 9% swipe fee.  I called BS and we started arguing lol.  There is a liqueur store around the corner that doesn't bat an eye at my amex and it is also classified as a grocery store.  I go there now almost exclusively and I get 6% back. Love it.

[Razeus]

AMEX charging double or triple Visa/MC fees are pure lies.  Aren't they inline with everyone else now?

[flowfaster]

He told me with a straight face "9%".  I could not belive it.  I hope it's not true or I bitched him out for nothing. lol

[Revelate]

Not all merchant accounts are created equally.  9% does seem a little outrageous; however, Amex has traditionally been higher than Visa / MC for all the merchants I've talked to.  

[jamesdwi]

As has been seen in other posts, most if not all CSR's and Cashiers have no idea what they are talking about credit SP vs HP what happens when a card is replaced with various lenders, underwriting standaards, etc, all it takes is one person to give mis-infomation about something and it gets repeated as if it was the truth, the more shocking the mis-information the more likely its to be remembered and repeated. 

Its certainly isn't part of a cashier training what the swipe fee is for various cards. But somebody comes in and says the switpe fee is 9%, its shocking and will be repeated as truth. It may even be true that one of thse new itunes or android apps have  a swipe fee of up to 9% for people that swipe AMEX once a month or less. Any retailer with an established account can get much lower swipe fees, Major vedors have volumes that reduce the swipe fee to less than 1.5%.