![\"\"](\"https:\/\/mintea.blog\/wp-content\/uploads\/2025\/02\/1739552778290.gif\")
<\/p>\n","protected":false},"excerpt":{"rendered":"Why is the credit card called \u201c\ud835\udc2d\ud835\udc21\ud835\udc1e \ud835\udc26\ud835\udc28\ud835\udc2c\ud835\udc2d \ud835\udc29\ud835\udc2b\ud835\udc28\ud835\udc1f\ud835\udc22\ud835\udc2d\ud835\udc1a\ud835\udc1b\ud835\udc25\ud835\udc1e product in banks\u201d? How does VISA\/Mastercard make money?<\/p>\n
The diagram below shows the economics of the credit card payment flow.<\/p>\n
1. The cardholder pays a merchant $100 to buy a product.<\/p>\n
2. The merchant benefits from the use of the credit card with higher sales volume, and needs to compensate the issuer and the card network for providing the payment service. The acquiring bank sets a fee with the merchant, called the \u201c\ud835\udc26\ud835\udc1e\ud835\udc2b\ud835\udc1c\ud835\udc21\ud835\udc1a\ud835\udc27\ud835\udc2d \ud835\udc1d\ud835\udc22\ud835\udc2c\ud835\udc1c\ud835\udc28\ud835\udc2e\ud835\udc27\ud835\udc2d \ud835\udc1f\ud835\udc1e\ud835\udc1e.\u201d<\/p>\n
3 – 4. The acquiring bank keeps $0.25 as the \ud835\udc1a\ud835\udc1c\ud835\udc2a\ud835\udc2e\ud835\udc22\ud835\udc2b\ud835\udc22\ud835\udc27\ud835\udc20 \ud835\udc26\ud835\udc1a\ud835\udc2b\ud835\udc24\ud835\udc2e\ud835\udc29, and $1.75 is paid to the issuing bank as the \ud835\udc22\ud835\udc27\ud835\udc2d\ud835\udc1e\ud835\udc2b\ud835\udc1c\ud835\udc21\ud835\udc1a\ud835\udc27\ud835\udc20\ud835\udc1e \ud835\udc1f\ud835\udc1e\ud835\udc1e. The merchant discount fee should cover the interchange fee.<\/p>\n
The interchange fee is set by the card network because it is less efficient for each issuing bank to negotiate fees with each merchant.<\/p>\n
5. The card network sets up the \ud835\udc27\ud835\udc1e\ud835\udc2d\ud835\udc30\ud835\udc28\ud835\udc2b\ud835\udc24 \ud835\udc1a\ud835\udc2c\ud835\udc2c\ud835\udc1e\ud835\udc2c\ud835\udc2c\ud835\udc26\ud835\udc1e\ud835\udc27\ud835\udc2d\ud835\udc2c \ud835\udc1a\ud835\udc27\ud835\udc1d \ud835\udc1f\ud835\udc1e\ud835\udc1e\ud835\udc2c with each bank, which pays the card network for its services every month. For example, VISA charges a 0.11% assessment, plus a $0.0195 usage fee, for every swipe.<\/p>\n
6. The cardholder pays the issuing bank for its services.<\/p>\n
Why should the issuing bank be compensated?
\n\ud83d\udd39The issuer pays the merchant even if the cardholder fails to pay the issuer.
\n\ud83d\udd39The issuer pays the merchant before the cardholder pays the issuer.
\n\ud83d\udd39The issuer has other operating costs, including managing customer accounts, providing statements, fraud detection, risk management, clearing & settlement, etc.<\/p>\n
Over to you: Does the card network charge the same interchange fee for big merchants as for small merchants?<\/p>\n
\u2013
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<\/p>\n","protected":false},"excerpt":{"rendered":"
Why is the credit card called \u201c\ud835\udc2d\ud835\udc21\ud835\udc1e \ud835\udc26\ud835\udc28\ud835\udc2c\ud835\udc2d \ud835\udc29\ud835\udc2b\ud835\udc28\ud835\udc1f\ud835\udc22\ud835\udc2d\ud835\udc1a\ud835\udc1b\ud835\udc25\ud835\udc1e product in banks\u201d? How does VISA\/Mastercard make money? The diagram below shows the economics of the credit card payment flow. 1. The cardholder pays a merchant $100 to buy a product. 2. The merchant benefits from the use of the credit card with higher sales volume, … Continue reading Credit Card Profitability Model<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[106],"tags":[97,105],"class_list":["post-2598","post","type-post","status-publish","format-standard","hentry","category-posts","tag-banking-creditcard","tag-linkedin"],"_links":{"self":[{"href":"https:\/\/mintea.blog\/index.php?rest_route=\/wp\/v2\/posts\/2598","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mintea.blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mintea.blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mintea.blog\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mintea.blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2598"}],"version-history":[{"count":2,"href":"https:\/\/mintea.blog\/index.php?rest_route=\/wp\/v2\/posts\/2598\/revisions"}],"predecessor-version":[{"id":2601,"href":"https:\/\/mintea.blog\/index.php?rest_route=\/wp\/v2\/posts\/2598\/revisions\/2601"}],"wp:attachment":[{"href":"https:\/\/mintea.blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2598"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mintea.blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2598"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mintea.blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2598"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}