How Credit Card Companies Make Money (and What You Pay)

5 min read · October 28, 2026

Credit card companies make money in three main ways: interest on balances you carry, fees, and a small charge stores pay each time you use the card. You only pay the first two. If you clear your balance in full each month, you usually pay no interest at all.

What are the three ways credit card companies make money?

Interest. You pay this when you don’t clear the full balance.
Fees. You pay these for certain actions, like paying late or taking out cash.
Interchange fees. The store’s side pays this every time you pay by card.

The first two come from you. The third comes from the store. Knowing which is which tells you what you can control.

How much do they earn from interest?

Interest is the fee you pay for borrowing money, shown as a percentage. (New to this? See what is interest.)

Interest is usually the biggest part. In a report published in October 2023, the US consumer regulator, the CFPB, found that card companies charged cardholders over $105 billion in interest in 2022. Fees came to about $25 billion. Interest was about four times larger.

The key point: MoneyHelper says that if you repay the full amount, you won’t pay interest on anything you’ve spent. If you pay less than the full amount, you pay interest on everything you owe.

So interest is paid by people who carry a balance.

What does interest cost on a real balance?

Say you carry $4,200 on a card at 19.9% a year.

Step 1. Monthly rate: 19.9 ÷ 12 = 1.658% a month.

Step 2. Interest this month: 4,200 × 0.01658 = about $70.

Step 3. If the balance stays at $4,200 all year, that is 4,200 × 0.199 = about $836 in interest.

That $836 is money going to the card company, not to your debt.

Nada's debt screen for a Visa card: $4,200 owed at 19.9% a year, costing about $70 a month in interest. — The same balance in Nada (sample data): about $70 of interest this month.

Now the same card, paid in full each month: $0 interest.

This is a close estimate. Your lender may work it out a little differently. The yearly rate is often shown as APR (see APR explained).

Which fees do cardholders pay?

Fee is a fixed charge for a specific action or feature, on top of any interest.

MoneyHelper lists these common ones:

Late payment. You’ll usually pay a late fee, and you might lose special deals like a low rate.
Cash withdrawals. Usually expensive interest and a fee each time. 0% spending cards usually still charge interest on cash.
Spending abroad. Standard cards are usually expensive to use abroad, with fees and poor exchange rates.
Annual fee. Some rewards and cashback cards charge a yearly fee to keep the card.
Balance transfer fee. Moving debt to a 0% card usually costs a fee. MoneyHelper gives a UK figure of 2% to 4% of the amount moved.

Not every card has every fee. Your card’s terms list the ones that apply to you.

What is an interchange fee, and who pays it?

Interchange fee is a small charge paid to your card company each time you pay with your card in a store or online.

The Reserve Bank of Australia, a central bank, explains how it works. The store’s payment provider pays the interchange fee to your card company every time a payment is made. The provider then passes this cost on to the store.

So the store pays for it in the end, not you directly. The RBA notes that the card company can use this money to keep costs down for cardholders and to fund rewards.

This is why a card company still earns from you even when you pay in full. It is also how “free” cards with rewards can exist.

How do you keep more of your money?

You can’t change interchange fees. You can change most of the rest.

Pay in full each month if you can. No balance means no interest.
If you can’t, pay as much as you can. Paying only the minimum keeps most of your money going to interest. See why the minimum payment keeps you in debt.
Avoid cash withdrawals on a credit card.

Do this today (10 minutes)

Open your latest statement. Write down your balance, yearly rate and any fees charged.

Work out your monthly interest: balance × yearly rate ÷ 12.

Set up an automatic payment of at least the minimum, so you never pay a late fee.

Nada does this math for you. Add your cards, see what interest costs you each month, and plan your payoff. Get Nada

FAQ

Do credit card companies make money if I pay in full every month? Yes, but not from you directly. When you pay the full balance on time, you usually pay no interest on purchases. The card company still earns an interchange fee from the store each time you pay by card. That is why a card can be free to use for people who always pay in full.

What is the biggest way credit card companies make money from cardholders? Interest. In a report on the US market, the CFPB found card companies charged over $105 billion in interest in 2022, against about $25 billion in fees. So for people who carry a balance, interest is usually the largest cost, far more than all fees together.

Is using a credit card to take out cash a bad idea? It is usually expensive. MoneyHelper says cash withdrawals on a credit card usually come with expensive interest and a fee each time. Even 0% spending cards usually still charge interest on cash. Check your card’s terms before you use it for cash.

How can I stop paying a credit card company anything? Pay the full balance by the due date each month, so no interest is added. Avoid cash withdrawals and late payments. Check whether your card charges an annual fee or a fee for spending abroad. If you already carry a balance, focus on clearing it first.

Sources

Read in October 2026.

Written by the Nada team. Reviewed October 2026.

This is general information, not personal advice.

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