Credit card companies make money through interest, annual fees, and more

Merchants have to pay credit card transaction fees each time a card is swiped

Credit card networks such as Visa, Mastercard, and American Express must calculate fees for not only the customer, but also the merchant in every transaction.

American Express runs on a 'spend-centric' model, using perks and merchant fees to drive profit

American Express cardholders tend to spend more money per transaction than other credit card users, which makes the interchange fees merchants have to pay to accept American Express cards worth it while incentivizing other companies to pay the interchange fee as well.

Card issuers are financial institutions that open credit to customers, while card networks facilitate purchases between merchants and customers

Card issuers give customers credit cards, set rate limits, and collect payments. Card networks, on the other hand, dictate where credit cards can actually be used by managing relationships between the network and merchants. These networks make money on interchange fees, which merchants pay to accept a specific card network at their stores.

Roughly 39% of Visa's revenue comes from data processing fees.

Visa gets roughly 0.13% to 0.14% of each transaction. About 32% of its revenue stems from the money banks pay Visa to use its services, and roughly 26% of its revenue comes from international transaction fees.

Rewards credit cards can offer points, travel miles, and more

For every dollar that a cardholder spends on a rewards credit card, they can also receive benefits such as cash back, airline miles, and more. For many, rewards are the reason they make so many purchases on credit cards in the first place.

Visa, the first credit card network, still dominates competitors with a roughly 52% market share by purchase volume.

Among the major credit card companies in the US, Mastercard had about 25% of the market share in 2025. American Express had roughly 20%, and Discover had the smallest market share of about 4%.

BNPL companies typically make money via merchant fees rather than interest

When a merchant partners with a buy now, pay later app, consumers are more likely to spend more money with that merchant—meaning that the merchant is willing to pay a small fee in exchange for the ability for customers to pay with buy now, pay later.

Financial institutions check for lots of things before authorizing a purchase

Before authorizing a purchase, card issuers consider whether or not the cardholder has a high enough available credit limit to make the purchase, where the purchase is being made in order to reduce fraud, and more.

US consumers collectively owe more than $1T to credit card companies—almost as much as they owe in auto loans.

The costs and fees for a payday loan include a 'finance charge'

Payday lenders typically make money via finance charges, a percentage or dollar amount that the borrower owes the lender per $100 borrowed. While the finance charge can range from $10 to $30 for every $100 borrowed, this would equate to an annual percentage rate of almost 400 percent for a two-week loan.

Why Americans are drowning in credit card debt

Americans owe more than $1T to credit card companies. And with rising interest rates that prevent cardholders from paying down debt (not to mention the rising cost of living), that number is likely to keep growing. A podcast episode explains how the US got here, and what policymakers and individuals can do about it.

Some banks derive half of their income from overdraft fees on checking accounts

The fees are incurred when a customer withdraws more money than is left in the account, typically around $35 per overdraft. One in 11 Americans pays more than $350 a year in such fees, generating tens of billions of dollars each year for banks..

Hedge funds, the private investment firms that trade a wide swath of financial assets, make money by imposing steep fees on investors and from the fund's investment performance.

Managing too many credit cards can be costly if they have annual fees

However, canceling cards must be strategic if it becomes necessary, as it can negatively impact your credit score. Before canceling, experts suggest asking if it's possible to downgrade to a no-annual-fee version in order to keep the account open, thus preventing potential hits to your credit score.

See an original Diner’s Club charge card

Before credit cards, there were charge cards from companies like Diner’s Club. While credit cards allow cardholders to carry a balance from month to month (potentially accruing interest), charge cards like Diner’s Club cards had to be paid off right away.

Banks make money by loaning customer deposits and earning interest

This means the interest you earn on your deposits is lower than what the bank earns on the same amount. Banks often keep cash reserves (though a minimum requirement was rescinded in 2020) but generally invest in government bonds, corporate securities, and loans to other banks. During bank runs, depositors withdraw more than the bank has on hand.

Credit unions, explained

Proponents of credit unions often point to the fact they’re not-for-profit cooperatives instead of for-profit businesses as a key selling point. This explainer dives into what this looks like in action—instead of pocketing the profits from interest rates, credit unions reinvest that money into the products and services they offer. For customers, this tends to create a more personal and community-oriented experience.

While the Fed is involved in issuing new generations of cash, the way it adds to the money supply does not involve printers

The majority of money in circulation is credit, not cash. This credit, which acts similarly to direct deposit from employers, is added to bank accounts by the Federal Reserve. The Fed also employs tools like the federal funds rate and open market operations to expand or contract credit.

Hedge funds make money from imposing steep fees on investors, as well as from investment performance

Hedge funds often operate on a "2 and 20" model: Investors pay fund managers a 2% management fee, and the hedge fund keeps 20% of their profits. (The 2% is imposed annually, irrespective of performance.) Hedge funds are known for chasing big returns—and taking big risks to get them. This explainer not only breaks down how they work in detail, but also the strategy first introduced in 1949 that still shapes hedge fund investing today.

Compounding, explained

During conversations about personal finance, the term "compounding" gets thrown around—but not everyone understands how compound interest and compound returns work. Broadly speaking, compounding is what happens when you not only earn returns or interest on your original investment, but also on the accumulated returns or interest you receive over time. This article explains how both of these processes function, and what compounding could mean for your wallet.

Privacy concerns in the credit scoring system

Because credit scores use a lot of personal information (such as whether or not someone makes credit card payments on time), some worry their privacy is being compromised in the data collection process.

A credit card’s grace period is a minimum of 21 days

Under federal law in the United States, an individual’s credit card payment due date must fall on the same day of each month, at least 21 days after the cardholder’s statement closing date.

The difference between cash flow and profit, explained

While cash flow is the net balance of cash moving in and out of a business, profit is the remaining balance after subtracting a business's operating expenses from its revenue.

The NFL makes most of its money through media licensing deals

The NFL, which reportedly earned more than $20B in 2023, generates its revenue through several key streams. The largest comes from media licensing deals, where networks and streaming platforms pay billions for the rights to broadcast games. Corporate sponsorships are another major contributor.

Nearly 3 million people fly in and out of US airports every day

However, not all of those passengers generate revenue for the airlines they purchase their tickets from. One business class traveler typically pays for five to six economy travelers. That's partly because airlines measure profit by the square foot, and although a business class seat is usually roughly 30% roomier than economy seats, the business class traveler usually pays about three times as much as someone sitting in economy.

Companies sometimes issue corporate bonds to raise capital

These bonds offer investors regular interest payments in addition to the return of the principal amount at maturity. They allow companies to raise capital without losing ownership.

How Google Street View generates profit

Google Maps, one of the most trusted navigation applications today, has a somewhat mysterious way of making a profit. YouTuber Phil Edwards uncovers the secret economic practices of Google Street View, while also offering a deeper understanding of how it works.

The price of gas is a composite made up of several different factors, with the federal gas tax making up less than 20% of what drivers pay at the pump.

The first steps to rebuilding your credit score include getting to know exactly what's on your credit report and figuring out how far you are from the '700 club,' or 'good score' range.

The US dollar is the most widely circulated currency in the world, and is involved in nearly 90% of global transactions

How Amazon operates a 'flywheel' business model, a self-reinforcing cycle that drives continuous growth

Art theft is the third-largest source of criminal revenues worldwide, thanks in part to the subjective nature of valuing a work of art.

Some coin denominations have ridges etched on their sides, partly to prevent counterfeiting, in a practice called 'reeding.'

The Nasdaq's 'Magnificent 7' companies are responsible for roughly 40% of the Nasdaq 100 index's gains, while the remaining 93 companies account for the other 60%.

Netflix profits when you're not watching, and its movies are designed that way—read a detail-rich critical essay exposing lesser-known Netflix takes

The USPS spent $3.97B in 2024, accounting for .058% of the federal budget.

Up to a million Girl Scouts sell about 200 million cookie boxes every spring, generating $800 million, largely because refusing a child is frowned upon

SpaceX's S-1 or 'prospectus' revealed many previously unknown details about the company, including its unprofitability despite doing $18.7B in revenue in 2025, exactly how many voting shares Elon Musk will have in the company (roughly 85%), and more.

Play the role of a student in a game where you try to navigate college and remain debt-free, selecting different income levels, high school experience, race, ethnicity, and more.

While the sun's gravity keeps the planets in orbit, their gravity also pulls on the sun, causing it and everything else in the solar system to orbit around a mutual balance point called the barycenter—the true center of the solar system.

When you complete a CAPTCHA on a website to prove you are human, you may be unknowingly training algorithms for self-driving cars, whose systems require training data to help identify crosswalks, bicycles, and other outdoor objects.

The most expensive ad of all time was for Chanel No. 5 perfume and cost roughly $33M to produce in 2004—about $57M in today's dollars.

Pure water does not conduct electricity because this flow of energy requires the movement of charged particles, and water is a neutral molecule.

When caught in the mouths of cardinal fish, seed shrimp release glowing, bioluminescent chemicals, which alert predators of the cardinal fish, prompting the shrimp's ejection.

Bone marrow (soft tissue found inside certain bones) generates roughly 500 billion new blood cells each day

The rivalry between Alexander Hamilton and Thomas Jefferson centered on federalism—the question of how much power the federal government should hold relative to the states.

Some renewable energy sources may weaken the resiliency of electric grids by removing outage buffers provided by coal- and natural gas-fired plants, which provide the system with more time to find a new power source if a plant goes down.

The deadliest aspect of volcanic eruptions is often not lava, but pyroclastic flows—avalanches of ash, gas, and rock that can move more than half the speed of sound.

Doctors differentiate between a phobia and fear by asking patients whether their fear interferes with their day-to-day activities.

Objects can be 3D printed with light by projecting 2D computerized tomography (CT) scans onto rotating cylinders of resin, which solidify upon exposure.