Credit Card Mix

Is there such a thing as a free credit card? Yes, there is! One can apply for a credit card that has no annual fees, no transaction fees and no interest charges as long as the balance is paid by the end of a grace period. “How is it possible?” – , one may ask, - “Somebody has to pay credit card issuers for all that it takes to maintain accounts and secure processing systems, customer services, etc.” Read on to find the answer to this question.

Who Pays for Your Free Credit Card?

Statistically over 60% of cardholders carry their balances over months. Last year credit card interest payments across all major credit card companies amounted to over 100 billion dollars. We can indisputably state that interest charges is one of the revenue sources for credit card companies. With such high odds of getting their money back, even if some of us get their services for free, credit card companies will always profit on our irresponsibleness or incapacity to pay off all at once.

Balance transfer fees, penalties for late payments, going over one’s credit limit and other charges become yet another huge source of revenue for the banks. It comes close to 1/5 of the total interest charges and last year’s fees added up to, approximately, $23 billion.

The most predictable and stable stream of revenue comes in a form of merchant fees. These are the commissions that merchants are ready to pay for accepting credit cards at their stores. It is estimated that around $32 billion was collected last year. Merchants pay on average 2% per transaction to satisfy their customers with fast and secure payment options.

Now you know who pays for your free credit card. Or not so free for some of us after all!

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* The information presented in this post might have changed since the time it was published.