Who Really Pays for Your Credit Card Rewards?
You buy a $100 pair of shoes with a credit card. A few days later, you open your card app and see: +$2 cashback Nice. It feels like the credit card company just gave you $2 for free. But banks are not charities. So where did that $2 actually come from? Follow the money behind a single $100 purchase, and credit card rewards start to look very different. The Store Doesn't Simply Get Your $100 When you pay $100 with a credit card, the money doesn't move directly from you to the store. Several businesses are involved in processing the transaction, including the card-issuing bank, the merchant's payment providers, and networks such as Visa or Mastercard. And those services cost money. One important part of that system is the: Interchange fee A 2026 NBER study describes U.S. credit card interchange fees as typically around: 1.9% of the transaction So on a $100 purchase, think roughly: $1.90 as a simple example. The exact amount varies by card, merchant and pay...