How do banks make money through credit cards

In my country, the current profit model of credit cards is: 1. Interest income is the interest paid by cardholders on unpaid credit card balances;

2. Information exchange income is the fee paid by the acquiring bank to the card issuing bank accounting for a certain percentage of the transaction amount of the special merchant;

3. Cardholder annual fee is the cardholder’s right to use the credit card. Fees paid to the card issuing bank; other fees and income include fees and income generated from various other credit card services, such as cash advance fees, loss report fees, fast card issuance fees, and replacement of transaction password letters. Handling fees, etc.; capital cost is the interest cost that the card issuer must pay to obtain the unpaid balance of the bank's credit card asset portfolio;

4. Service fee is the cost incurred by the front-end and customer contact; transaction Processing costs are the fees incurred by the backend for customer service. 5. Special merchant rebates are fees charged by the acquiring bank to special merchants for providing transaction processing and assuming credit risks; deposit interest income is the deposit interest income obtained from the deposit accounts of special merchants; other income is rental POS and pressure Income from card machines, etc. Of the profit from the credit card business, 78% comes from credit interest income, 10% from interchange fees, 2% from annual fees, 4% from cash withdrawal fees, and 6% from late payment and other income.

6. Late payment fees, over-limit fees, etc.;

What are the profit models of credit cards?

The credit card industry should not simply pursue the number of cards issued and used. The issuance and use of credit cards must be subject to the profit goals stipulated in the business model. In our country, the credit card business is still operated by commercial banks, which are both issuing banks and acquiring banks. The following discusses the profit model of credit cards from the two aspects of the card issuing bank and the acquiring bank.

Interest income is the interest paid by the cardholder on the outstanding credit card balance; information exchange income is the interest paid by the acquiring bank to the issuing bank. A fee that accounts for a certain percentage of the transaction amount of a special merchant; the annual cardholder fee is the fee paid by the cardholder to the card issuer for obtaining the right to use the credit card; other handling fees and income include handling procedures generated from various other credit card services Fees and income, such as cash advance fees, loss report fees, fast card issuance fees, replacement transaction password letter fees, etc.; the capital cost is what the card issuer must pay to obtain the unpaid balance of funds in the bank's credit card asset portfolio. Interest costs; losses include bad debt losses, credit card fraud losses, etc.; service costs are the costs incurred by the front-end and customer contact; transaction processing costs are the costs incurred by the backend for customer service.

Specialized merchant rebates are fees charged by the acquiring bank to special merchants for providing transaction processing and assuming credit risks; deposit interest income is the deposit interest income obtained from the deposit accounts of special merchants; other income That is, income from renting POS and card presses, etc. Of the profit from the credit card business, 78% comes from credit interest income, 10% from interchange fees, 2% from annual fees, 4% from cash withdrawal fees, and 6% from late payment and other income.

There are also some units that focus their profits on defaults and excessive fines, thus forming a new credit card business model. This profit model is a credit card with a low credit limit issued by the card issuer for consumers who have difficulty applying for consumer loans. On the one hand, a low credit limit causes cardholders to easily default and exceed their limit, thereby increasing fine income; on the other hand, a low credit limit can reduce personal and overall credit risks.

How do credit cards make money?

The profit model of credit card business:

Interest income is the interest paid by cardholders on unpaid credit card balances.

Information exchange income is the fee paid by the acquiring bank to the card issuing bank, accounting for a certain percentage of the transaction amount of the special merchant; the annual cardholder fee is the fee paid by the cardholder to the card issuing bank for obtaining the right to use the credit card. ;Other fees and income include fees and income generated from various other credit card services.

Special merchant rebates are fees charged by the acquiring bank to special merchants for providing transaction processing and assuming credit risks; deposit interest income is the deposit interest income obtained from the deposit accounts of special merchants.

Other income includes income from renting POS and card presses, etc. Of the profit from the credit card business, 78% comes from credit interest income, 10% from interchange fees, 2% from annual fees, 4% from cash withdrawal fees, and 6% from late payment and other income.

Extended information

Characteristics of credit cards:

1. Pre-deposit of cash is not encouraged. Spend first and repay later. Enjoy an interest-free repayment period and can repay in installments by yourself. (with a minimum repayment amount), and join international credit card organizations such as VISA, MasterCard, JCB, etc. for global use.

2. It is one of the fastest growing financial services today and is an electronic currency that can replace traditional cash circulation within a certain range.

3. It has both payment and credit functions. Cardholders can use it to purchase goods or enjoy services, and can also obtain certain loans from card issuers by using their credit cards.

4. It is a high-tech product that integrates financial services and computer technology.

5. It can reduce the use of cash currency.

6. It can provide settlement services to facilitate shopping and consumption and enhance a sense of security.

7. It can simplify the collection procedures and save social labor.

8. Can promote product sales and social demand.