ANATOMY OF A CREDIT CARD REWARDS PROGRAM

Summary from the TLDR newsletter

Credit cards earn money in multiple different ways. One important method is interchange, a fee paid by card-accepting businesses. The fee is split between various parties in the credit card ecosystem for marketing. Credit card issuers offer rewards cards so customers use their rails and then compete with each other for 'share of wallet' by bidding with interchange. Not every card is a reward card due to different card applications and features, regulations, collusion, and other reasons. This article explains how credit card rewards programs work and the systems that work together that make them profitable.