In what way credit card organisations such as mastercard & visa make profit?
Answer:
The credit card companies first charge the merchants who use their services. This is usually around 5% of the purchase that the consumer makes.
Then the credit company charges people who do not pay their balance in full, interest. These can be very pricey..I have seen up to 24%.
Finally, they lend out money in the form of "checks to be used for any purpose" hoping to get you to take the bait, and therefore add to your credit card debt..paying more interest
Bottom line, they are wealthy and always will be.
The interest that you pay everymonth!
interest, late charges and annual fees
by people not paying what they owe and getting into debt!
The card issuer earns money on the interest paid by card holders (The card issuer is the bank or financial institution that the card holder sends payments to).
Master card and Visa make money on the fees they charge retailers and businesses to process credit card transactions.
Bookbyte has it right, master card and visa charge a service fee, internationally it's about 3% to use the card, Discover and Amex charge more that is why they are not as common as visa/MC.
Credit cards make money in a number of different ways.
First off are yearly fees. You pay X amount every year for your credit card. How much that is depends upon who your credit card is, if it's a "vanity" card (like for your favorite football team or something), and probably what sort of card it is (with a "gold card" you might have a higher yearly fee). Some credit cards also waive - or don't make you pay - the yearly fee. Some others might have a "no annual fee" credit card.
Interest charges - this is where credit cards make the majority of their money. You charge something, and then you pay interest on the amount your charged, until it that amount is paid off. Obviously, the longer you wait to pay off the amount your charged, the more it's going to cost you to repay it.
Other various fees - you might have a "late fee" if you don't pay your bill on time, you might have an "over limit fee" if you go over your credit limit. Again - these are just straight profit for the credit card companies.
Transaction fees - most credit cards charge the retailer a certain amount for each transaction they process for them. I think the amount is like 2 or 3% per transaction. I think that businesses just figure that into the cost of doing business. Obviously, the benefit to a business in accepting credit card payments is that they get the money from the credit card company, they don't have to worry about bounced checks, or even if the person doesn't pay off their credit card - they get the money regardless. And let's face it - lots and lots of people pay for stuff with their credit cards that they couldn't normally afford if they had to pay cash.
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