Your mansion might have a home office or two.
Not necessarily. Say you’re hugely wealthy and keep an office with a small staff to manage your affairs. You might have your secretary buy office supplies on your card.
Thanks, I decided to go ahead and get the card. Sounds like there’s nothing to worry about. I’ve never used a credit card as a loan so I don’t care what their interest rate is. And it’s likely that I’ll just use this card for everything, so they’ll make up for their losses at Hess and Staples with big merchant fees everywhere else.
Merchant fees do not go to the card issuer. The card is issued by a bank, who is responsible for extending the actual credit to you. They collect interest/fees, and dole out the cashback.
Merchant fees go to the actual companies of Visa, Mastercard, and American Express, as well as to the companies which provide merchant card processing services using their (Visa/MC/Amex’s) respective networks.
I was wondering this. So all the cash that my merchants spend on fees for accepting my credit card go to Mastercard, and all the cash back to me comes from CitiBank? I’m surprised Citi even talks to me, since I’ve never paid them a dime in finance charges and cost them close to $300 a year in cash. Does the bank make anything from a card holder that pays their balance off every month? I had always assumed the merchant fees were split somehow between the bank, the processors and the credit network in question (Visa, MC, AMEX etc)?
As far as I am aware, no. (Although they are also big on trying to sell you extra services, like “payment protector plans”) It’s a cost of doing business. That’s why they collect such a killing from those who don’t pay off their balance every month. 
All the better! AMEX takes all of the money they get from you, and shuffles it over to the po’ folk buying pens and paper.
Yeah, I’ve had an American Express card for about 20 years. I still have the charge account with them that I’ve had since 20 years ago, but have also since added one of the traditional credit cards that they introduced in the late 90s (iirc on the timeline.)
For about the first 10 years I primarily used the AmEx for big ticket items, plane tickets, and things in that vein. I used it enough that I’ve gotten several free flights out of it in my day, although I generally don’t care much about rewards programs.
The newest rewards system they’ve implemented has worked wonders at getting me to actually use the card for every day stuff. Plane tickets were the entirety of how I spent my rewards points until they overhauled their system and allowed you to redeem the points for almost anything online. They also put in a system where if charging something to the card every day causes points to accumulate at 2x the normal rate, and certain stores give you 5x as many points per dollar spent.
It’s not really much, but it adds up if you spend a lot of money in a calendar year like I do. Roughly speaking, every dollar charged to the card is “1 point”, for a frame of reference a $25 gift certificate for Amazon.com is 2,500 points (or $2,500 in charges on the card.) Not exactly the most beneficial conversion, but if you regularly use your card to pay things like your cable, electric, telephone et cetera it’s very easy for it to add up. And if you use it every day you’ll accumulate points at a 2x rate so it’s only $1,250 for $25 in points. (Gift certificates tend to get you less bang for your buck so to speak, for example $200 worth of gift certificates will cost about 3-4 times as many points as a $200 plane ticket)
For every person like me who uses their card enough to easily make up for the annual fee, there’s probably tons of people who don’t even come close. A lot of people I know have an AmEx card that rarely if ever leaves it’s slot in the wallet.
Yeah, I second this wonderment. I’ve only paid the occasional interest every once in a great while to Citi, but yet every time I call them, I get through instantly without being on hold. When I ask if $x charge with go through beyond my credit limit (no pre-set limit, but the overage must be paid off like a charge account), they assure me there won’t be a problem. I’ll guess that I’ve given them less than $100 in interest over the last six years (plus $50/year or so for annual fees), but I’d been sure of being a VIP by giving them $6000+ in merchant commissions (yeah, I charge everything I possibly can). Surely there must be some type of fee sharing, otherwise I’d think they’d want to drop me.
I don’t believe that this is correct. I believe that the card issuing bank gets part of the merchant fee, and that’s what the Wikipedia article on credit cards suggests. So even though I always pay off my United Airlines Mileage Plus Visa card each month, Chase Bank makes some money off me.
Looks like it’s a little of both:
I don’t see how that source makes it “a little of both” niblet - if by “card issuing company” it means Visa/MC/Amex, then it seems to support what I said, that the bank does not receive a cut. But if it means the bank itself as the “card issuing company”, then it’s a different ballgame.
I’m not a banker, and would like to settle this for sure - I think more research is required (I will be looking into it but I wanted to bump this thread back up)
OK, I was indeed wrong. I found a pamphlet from Discover (PDF link) stating that the merchant fees are split between the network (Visa/MC/Amex/Discover), the processing companies, and the bank that issues the card as well. Also interesting to note is that both Amex and Discover operate as both their own bank and network, unlike Visas and Mastercards which can be issued by many different banks.