How credit card rewards work
Taking a look at the business model of credit card rewards. Highlighting some key differences present in the USA, the UK, and Indonesia.
For the consumer, credit card rewards are great. Just by using a particular card to pay for goods or services, we can get the product we want, and additional benefits too. These rewards often come in the form of air miles - airline loyalty points, cashback, rebates or some other benefit.
If I pay with a debit card, a credit card, cash, or some other means, the retailer still gets the money. But specifically with a credit card the consumer may also gain extra perks. So how does this work? Rewards are possible due to the business model of card payments.
Wherever card payments occur, the same core business model is in play. But when it comes to rewards, some markets are more lucrative than others. Regulations affect rewards, and individual markets vary. It’s interesting to look at examples of how countries rewards markets have evolved differently, but firstly, let’s understand the business model that makes credit card rewards possible.
