Depends on what "credit card company" you are talking about.

Visa/Mastercard/AmEx and others don't care whether you are paying off your bill or not. The take a cut of every transaction done on their networks.

Banks that issue the cards do profit from interest, but that is somewhat balanced by some people just never paying. They also collect various kinds of fees, whether directly for the card or other parts of their business (e.g. they attract customers with good cash back cards then sell them on mortgages or auto loans).

Ultimately everyone is paying for credit cards simply from the price of goods they buy going up to account for the costs.

I am hearing from vendors that the card companies have been raising their rates recently too.

> Or am I benefiting from others bad spending habits?

Exactly this. I'm getting 3-5% cash back because some folks don't pay off their card every month. The rich get richer.

You're getting 3-5% cash back because they charge the merchants 3-5% extra on your purchases. That's it.

EDIT: point was, it's really nothing to do with whether other people are carrying balances or not.

The companies that provide the cash back get way less than 3-5% of the gross purchase price. Merchant fees, at least for Visa, don't even approach 5%[0] -- it's more like 1.5 to 3%. And they're definitely not spending all that fee on rewards (and thus taking no profit).

0: https://paymentdepot.com/blog/average-credit-card-processing...

And many merchants either have this priced into their product already, or charge a fee to process a card.

And if the merchants have it priced into their product, you're a fool to pay cash instead of getting your cut of the rebate.

Another thing to consider is that no payment method is free for the merchant. Even with cash, you need to pay Loomis, or you need to pay an employee to physically visit a bank.

and your individual spending choices have no bearing on whether the merchants will continue to charge that fee. So you might as well get the benefit of it

> If you just use a credit card like a debit card

Not sure how legitimate my source is but it looks like they raked in ~$75bn in 2020 from interest income alone. That makes me wonder if those of us that do use a CC as a debit card are a minority.

Source: https://www.fool.com/the-ascent/research/credit-card-company...

Very much a minority. The average credit card balance is over $5000 according to https://www.creditcards.com/statistics/credit-card-debt-stat... And the interest rates are ridiculously high so they can afford even a large number of people paying off their bills each month.

I like you, pay off mine at the end of the month... It seems the percentage of people who do that is around 40%... which seems maybe high...

ALso don't forget, credit card companies charge at least 1.5% of a fee to the retailer, this is why some places (usually gas stations) will have a cash price and a card price...

But yeah... lots of the perks are paid for by the rest of people who aren't paying off the balance...

Two ways:

1. Interchange fees. You are probably paying 1 to 3 percent baked into the costs of what you are buying to pay for the privilege of using a credit card as method of payment.

2. If you don't pay off every month, you are paying pretty hefty interest on any of your balance that carries over from month to month.

> How do credit card companies stay in business?

https://bam.kalzumeus.com/archive/how-credit-cards-make-mone... is worth a read.

Credit card companies make money from merchants who pay them a fee and from interest on credit card debt. There are likely additional revenue streams but those are 2 prominent one.

> Credit card companies make money from merchants who pay them a fee and from interest on credit card debt.

Wrong on the second point. The issuing banks (Capital One, Chase, etc..) are the ones that collect the revenue from the interest/late fees on credit card debt.

The credit card companies (Visa, MC, etc..) only make money from the transaction and settlement phases.

Oh interesting, good to know.

> How do credit card companies stay in business?

Your purchase data is worth more than gold. Merchants also pay a fee on every credit card purchase.

They collect fees from merchants.