what are at least two ways credit card companies make money?

Credit card companies make money in several ways, but two of the biggest are interest charges and fees paid by merchants and cardholders.

What Are At Least Two Ways Credit Card Companies Make Money?

1. Interest on unpaid balances

When you don’t pay your full statement balance by the due date, the remaining amount becomes a revolving balance and starts accruing interest at your card’s APR. This interest can be a major revenue stream because many cardholders carry balances from month to month, especially when rates are high.

A simple example:
If you owe 1,000 and your APR is 24%, roughly 20 a month in interest is added if you only make minimum payments (the exact number depends on how the issuer calculates interest). Multiply that by millions of customers, and you see why interest is so profitable.

2. Transaction (interchange) fees from merchants

Every time you swipe, tap, or use your card online, the merchant pays a small percentage of the transaction (often around 1%–3%) as a fee to the banks and the card network. This is often called an interchange fee, swipe fee, or part of the “merchant discount.”

You never see this fee directly, but it’s built into the cost of doing business for the store, which may respond with slightly higher prices or discounts for cash. Even if you always pay in full and avoid interest, your spending still generates fee income for the card ecosystem through these merchant charges.

3. Other common fee income (beyond the “at least two”)

Besides interest and interchange, card companies also earn money from various cardholder fees.

Some of the most common are:

• Annual fees on certain rewards or premium travel cards, sometimes hundreds of dollars per year.

• Late payment fees if you miss the due date, on top of extra penalty interest in some cases.

• Balance transfer fees (often 3%–5% of the amount moved) when you shift debt from one card to another.

• Cash advance fees and higher interest rates on money you withdraw from an ATM using your card.

Each of these fees is small on its own, but across millions of accounts they add up to a steady revenue stream.

Quick mini-view: who pays what?

Here’s a short, friendly breakdown of where the money comes from:

• Cardholders who carry balances: Mainly interest, plus late fees, cash advance fees, and sometimes annual fees.

• Cardholders who always pay in full: Little or no interest, but the company still earns from merchant fees and any annual fees.

• Merchants: Pay interchange/transaction fees on every card purchase, which helps fund rewards and card operations.

Tiny story-style snapshot

Imagine two friends using credit cards in 2026: one pays the full balance every month, the other often carries a balance. The first friend helps the card company earn money mainly through merchant fees each time they tap to pay, plus maybe an annual fee for a fancy travel card. The second friend not only triggers those same merchant fees but also pays ongoing interest and the occasional late fee, making them far more profitable to the issuer.

In short: At least two big ways credit card companies make money are (1) interest on unpaid balances and (2) transaction/interchange fees charged to merchants, with extra fuel from annual, late, and other service fees.