Are credit cards profitable?
Matthew Harrington
Updated on February 03, 2026
To simplify, we can safely assume that credit card companies are earning interest of 21% of the total outstanding balance. In other words, the amount spent on a credit card by the customers is fetching an interest of 21% to banks. From which line of credit, the bank can generate interest income of 21%.
Who profits from credit card debt?
Credit card companies make the bulk of their money from three things: interest, fees charged to cardholders, and transaction fees paid by businesses that accept credit cards. Use credit cards wisely, and you can minimize the amount of money that credit card companies make off of you.
How are credit card companies make money or earn profit?
Therefore for delayed payment credit card companies are charging 42% interest rate. To simplify, we can safely assume that credit card companies are earning interest of 21% of the total outstanding balance. In other words, the amount spent on a credit card by the customers is fetching an interest of 21% to banks.
How do credit card issuers and networks make money?
Card issuers and networks make money in different ways. Networks typically make their money from the merchants, who pay a fee to accept electronic payments from credit cards. The issuers make money from the consumer by charging them interest and fees according to their credit card agreements.
How is cash back profitable for credit card companies?
If the cardholder has a participating cash back rewards program, the credit card issuer simply shares some of the merchant fees with the consumer. The goal is to incentivize people to use their credit cards when making payments rather than cash or debit cards, which earns them no rewards.
How can I make more money with my credit card?
Without cardholders like you, credit card companies don’t make money — but you can limit the amount they make from you. Avoid extra costs by: Paying your balance in full every month to avoid interest charges. Setting up electronic alerts that notify you when payments are due, so you avoid late fees.
