How do credit card companies make money?

Here's a breakdown of how they generate profits:

 Interest on Revolving Balances

When users carry a balance (i.e., don’t pay the full amount due), card issuers charge high interest rates — typically 12% to 20% APR or more in Greece. This is the largest source of income for credit card issuers.

Merchant Fees (Interchange Fees)

Every time a consumer uses a credit card to make a purchase, the merchant pays a transaction fee, typically around 1%–3% of the transaction value. This fee is split:

• Interchange fee goes to the card issuer (e.g., Alpha Bank, Eurobank).

• Network fee goes to the card network (e.g., Visa, Mastercard).

• Processor fee goes to the payment processor.

These fees are paid by the merchant, not the consumer.

Late Payment Fees & Penalties

If a cardholder misses a payment or exceeds their credit limit, companies impose:

• Late fees

• Over-limit fees

• Returned payment fees

These add up quickly and are high-margin sources of revenue.

 Annual Fees

Some credit cards in Greece charge an annual membership fee, especially cards that offer rewards or travel benefits.

 Foreign Transaction Fees

Greek cardholders using their card abroad (or online in foreign currency) often pay a foreign transaction fee of 1%–3%, unless the card is specifically marketed as “travel-friendly.”

Partnerships & Rewards

Card companies often collaborate with:

• Airlines (e.g., Aegean Miles+Bonus credit cards)

• Supermarkets or gas stations
  These deals bring in commission-based income and help credit card companies acquire and retain customers.

Cash Advance Fees

Withdrawing cash from an ATM using a credit card triggers:

• High interest (no grace period)

• Immediate fees, typically 3–5% of the amount

In Greece Specifically:

• Credit card penetration is lower than in countries like the U.S., but has increased significantly post-COVID due to digital payments and POS usage growth.

• The Greek banking sector (e.g., Alpha Bank, Eurobank, Piraeus) often issues cards directly, and profits go to them, not just the networks (Visa/Mastercard).

• Contactless and loyalty programs have grown, pushing more usage — and more fees.