How do banks offer credit cards with 0.3% interchange? Do they charge an annual fee? If you have the standard 30 day bill cycle + 30 days to pay, thats is upwards of 60 days for an interest free loan to the customer.
The biggest difference is no loyalty points.
Someone needs to pay for those 50k airline miles if you sign up for a new card. And when interchange is that low, there’s no margin left for bank to offer (pay for) loyalty points.
However, that is not the world we live in. Most people carry balances a majority of the time, with interest rates significantly above "the cost of money".
Further, the banks (really: card issuers) (in the US, at least), are collecting 0.5-4% of all transactions as fees.
My understanding is that it's a bit like bank accounts, it's paid for by people who don't pay their entire bill and take the high APR, leave a large balance after the intro period, etc.
Basically, if you do it right, you win, if you do it wrong, you lose and often big.