{"id":5333,"date":"2013-05-31T11:39:48","date_gmt":"2013-05-31T03:39:48","guid":{"rendered":"http:\/\/www.imoney.my\/articles\/?p=5333"},"modified":"2015-12-28T10:23:43","modified_gmt":"2015-12-28T02:23:43","slug":"how-credit-cards-can-afford-to-offer-rewards","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/how-credit-cards-can-afford-to-offer-rewards","title":{"rendered":"How Do Credit Card Rewards Work?"},"content":{"rendered":"<p style=\"text-align: center;\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-5335 aligncenter\" alt=\"gifting a credit card reward\" src=\"\/articles\/wp-content\/uploads\/2013\/05\/shutterstock_25800193.jpg\" width=\"380\" height=\"310\" \/><\/p>\n<p align=\"left\">Nowadays, rewards have become part and parcel of the whole credit card experience. Every time we pay for something with our cards, most of us instinctively expect to receive some form of rebates or points which we can accumulate to redeem gifts and vouchers, which leads us to the question:\u00a0How do credit card rewards work?<\/p>\n<h2 align=\"left\"><span class=\"ez-toc-section\" id=\"The-parties-involved\"><\/span><b>The parties involved <\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p align=\"left\">Before we proceed, let\u2019s take a moment to ascertain the parties who are involved in a standard \u00a0card transaction (other than you, the card user). Commonly, they are:<\/p>\n<ul>\n<li>The\u00a0<b>Merchant<\/b>, which refers to the outlet in which you make the transaction.<\/li>\n<li>The\u00a0<b>Merchant\u2019s Bank<\/b>, which provides the point-of-sale terminal and system that enable the Merchant to accept credit transactions.<\/li>\n<li>The\u00a0<b>Card Network<\/b>, which refers to entities such as Visa, MasterCard etc. which facilitates credit transactions and settlements.<\/li>\n<li>The\u00a0<b>Issuing Bank<\/b>, which refers to the bank that issued the credit services you\u2019re using.<\/li>\n<\/ul>\n<h2 align=\"left\"><span class=\"ez-toc-section\" id=\"How-are-you-being-rewarded\"><\/span><b>How are you being rewarded?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p align=\"left\">The truth is, when you make a purchase using your credit payment card, the merchant does not get 100% of the payment you\u2019ve made.<\/p>\n<p align=\"left\">Instead, a percentage of the payment is divided between the merchant\u2019s bank, the card network and the issuing bank (i.e. the percentage is different from merchant to merchant and depends on factors such as sales volumes as well as the arrangements with the banks). Part of this is then set aside by the issuing bank to fund its reward programme.<\/p>\n<p align=\"left\">What this means is that the merchants are effectively bearing the cost of giving you rewards by having a fraction of their credit payment transactions deducted for such purpose. So next time you go shopping, make sure you thank your favourite retailers for helping finance your card\u2019s reward programme!<\/p>\n<h2 align=\"left\"><span class=\"ez-toc-section\" id=\"Common-practice-in-Malaysia\"><\/span><b>C<\/b><b>ommon practice in Malaysia<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p align=\"left\">In Malaysia, many consumers have reportedly been asked to pay an additional 2-3% surcharge for card transactions, especially by small-time merchants. In such cases, the merchants are essentially passing on the aforementioned charges they have to incur (i.e. to be paid to the merchant\u2019s bank, the card network and the issuing bank) over to you, the consumer.<\/p>\n<p align=\"left\">However, do note that according to a report by\u00a0<a href=\"http:\/\/biz.thestar.com.my\/news\/story.asp?file=\/2009\/11\/9\/business\/5071427\" target=\"_blank\" rel=\"nofollow\"><i>The Star<\/i><\/a>\u00a0some time back, this practice is actually\u00a0<b>not allowed<\/b>\u00a0in Malaysia and should be reported to the authorities, as seen in the following statement:<\/p>\n<p align=\"left\">\u201c<i>Credit-card users who are told to pay extra if they use their cards instead of cash should be aware that merchants are not allowed to impose merchant fees on users as stipulated in the card associations\u2019 operating regulations.\u201d<\/i><\/p>\n<p align=\"left\"><b>\u00a0<\/b><\/p>\n<h3 align=\"left\"><span class=\"ez-toc-section\" id=\"Love-this-article-You-may-also-want-to-check-out-our-infographic-detailing-what-happens-behind-the-scene-every-time-you-swipe-your-credit-card-to-make-a-purchase\"><\/span><b>Love this article? You may also want to check out our infographic detailing\u00a0<\/b><b><span style=\"text-decoration: underline;\"><a href=\"\/articles\/the-anatomy-of-a-credit-card-transaction-infographic\/\" target=\"_blank\">what happens behind the scene every time you swipe your credit card to make a purchase<\/a><\/span><\/b><b>.<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h3 align=\"left\"><span class=\"ez-toc-section\" id=\"Alternatively-check-out-our-credit-card-comparison-table-to-see-the-kinds-of-rewards-card-companies-are-offering-right-now\"><\/span><b>Alternatively, check out our\u00a0<\/b><b><span style=\"text-decoration: underline;\"><a href=\"https:\/\/www.imoney.my\/credit-card\/\" target=\"_blank\">credit card comparison table<\/a><\/span><\/b><b>\u00a0to see the kinds of rewards card companies are offering right now!<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><a href=\"http:\/\/offers.imoney.my\/campaign\/Petrol-Quiz?utm_source=article&amp;utm_medium=banner&amp;utm_campaign=how-credit-cards-can-afford-to-offer-rewards\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-13111\" alt=\"petrol-quiz-ads_600x300\" src=\"https:\/\/static.imoney.my\/articles\/wp-content\/uploads\/petrol-quiz-ads_600x300.jpg\" width=\"600\" height=\"300\" \/><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Many credit cards offer points and gifts. But how is it possible, and who&#8217;s paying for the rewards on your card? <\/p>\n","protected":false},"author":1,"featured_media":8959,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[11,227,232],"tags":[],"class_list":["post-5333","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cards","category-credit-card","category-rewards-credit-card"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How Do Credit Card Rewards Work? | iMoney<\/title>\n<meta name=\"description\" content=\"Many credit cards offer points and gifts. 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