How Do Credit Card Companies Make Money?

Published September 2020
Credit Card being swiped through Credit Card reader

According to a ValuePenguin study, credit card companies generate approximately $213 from each active credit card account per year. That translates to billions of dollars annually.

Based on annual data from one recent year, here's a look at how much money major credit card companies can make in interest fees and interchange fees annually:

Credit Card Provider

Interest Income

Interchange Income

American Express






Capital One



Chase Bank













That's great news for the credit card companies, but not so great for consumers. You can't control every fee that a credit card company makes from your account, but you can often reduce some of the fees credit card companies charge your account.

The first step is to understand how credit card companies make their money. There are two types of credit card companies. 

  • Credit card issuers are banks and credit unions that provide the funds you borrow through your credit card. 
  • Credit card networks provide transaction-processing technology. They typically earn their revenues from merchants and issuers using their technology. 

Some credit card networks, such as American Express and Discover, act as networks as well as issuers. Credit card companies maintain multiple revenue streams, including the following: 

  • Interest revenues
  • Non-interest income 
  • Interchange revenues 
  • Assessment fees

Interest Revenues

Depending on their business model, credit card companies generate the bulk of their revenues through the interest they charge on balance-carrying accounts. The way to avoid interest is to pay your credit card balance in full every month. 

Non-interest Income

Card issuers generate revenues from a variety of credit card fees. 

  • Annual fees are a great way for credit card companies to cash in on those with subprime credit scores. They are also common among mass-market credit card issuers. Make sure you understand the annual fees your credit card carries. Apply for a card that offsets these fees through various rewards or, better yet, choose a card with no annual fee. 
  • You incur cash advance fees (which typically come with higher interest rates than those charges for purchases) when you use your credit card to pick up cash at an ATM. Set up an emergency fund, so you do not have to resort to cash advances. 
  • Transferring your balance from a high-APR card to a low-APR one sometimes incurs a fee of 3-5 percent of the balance. Choose a card with no balance transfer fee or one that has waived it for a set period. 
  • If you fail to pay the minimum amount by the due date, you incur late fees. Some cards have waived such fees. Make sure you know when your due dates are. Set up an electronic alert if needed. 
  • Foreign exchange fees occur when you use your credit card abroad. Choose a credit card with no such fees or avoid using your credit card in other countries. 

Interchange Revenues and Assessment Fees

Interchange fees make up the second-largest revenue stream of credit card companies. The credit card issuers collect fees from merchants for every transaction they process. In the US, this interchange rate is 1.75% on average. It will, however, vary from one card to another. 

To be clear, these fees are charged to the merchant that accepts credit cards, not to the consumer directly. However, these fees may affect what you pay in a store simply because merchants may raise their prices to account for the interchange fees they have to pay to the credit card companies.

Assessment fees are small commissions that credit card networks charge merchants on transactions. These fees are lower than the interchange fees. For Visa and MasterCard, they are around 0.12-0.13 percent. Assessment fees fall into the same category as interchange fees in that they do not directly impact consumers because they are charged to the merchant. However, merchants may choose to pass those costs on to consumers in the way of increased prices for retail purchases.

Prompt Payment and Due Diligence Prevents Problems

Optimal credit card use is a balancing act. If you pay your credit cards on time, try to pay your entire balance each month, and avoid unnecessary fees, your credit will be strong and healthy. 

If you are struggling to accomplish that, you don't have to struggle alone. Contact a ClearOne Certified Debt Specialist now at 866-481-1597 to discuss your debt relief options and  get a personalized debt relief plan today. Woman looking at personalized debt relief plan on laptop screen  

Topics: Credit Card Debt