How Credit Card Companies Make Money-Dubai UAE

How Credit Card Companies Make Money-Dubai UAE

Lets say you have a HSBC Visa Platinum credit card and you use it extensively across UAE but always pay your bill in full every month. Neither do you pay any interest nor do you pay any fee. So Do you still think HSBC UAE is making any money at all. Well, HSBC will still make money whenever you use your credit card.

Lets say you bought Almarai Mozzarella Shredded Cheese from Carrefour or Lulu or some other hypermarket for AED 28 (just for hypothesis sake- price might differ) with your HSBC credit card. The card reader at the point-of-sale will immediately recognize who the customer is and contacts the card issuing bank.

In this case, HSBC UAE. HSBC bank will send AED 28 to Emirates NBD bank (Merchant’s bank-Just for example sake). Now Emirates NBD will deposit the amount after deducting the commission of HSBC. Here I am considering 2% of AED 28. That comes to 56 fils. This 56 fils is given to HSBC bank, which is the issuing bank. HSBC will split this with Visa, the credit card brand.

The commission might vary from merchant to merchant and the kinds of purchase. This example is just for the sake of understanding and there could be more parties involved and also there could be various other terms and conditions.

This is one of the ways in which credit card companies earn profit from purchases.

The other ways in which credit card companies profit are:

#1. Interest

Not all of us pay our credit bill in full month-on-month. Minimum payment facility has lured us into carrying a monthly balance and on the balance, the credit card issuing banks charge a interest rate. This interest varies from company to company and the also depends on individual cards and the privileges they offer. Interest is one of important sources of revenue for issuers of plastic money

#2. Fee

Credit card companies charge a wide variety of fees to the credit card holders like annual fee for making available the facility of credit, over limit fee which is charged if your swipe your credit card beyond your credit limit, foreign transaction fee if you use your credit card beyond UAE’s borders, late payment fee if you delay your monthly credit card bill and so on.

#3. Selling your personal information

Well, I am not very sure whether this is being done today but your personal information like you name and contact could be sold to other credit card companies, so that they too can advertise their enticing offers to you.

Here is an infographic to summarize the ways in which profit is made by credit card companies via 

These are some of the ways in which credit card companies make money. Do you think I missed on something important or do you know any other ways in which credit card companies make money? Let me know in comments.

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