Blame it on being a MasterCard/visa and hence only being able to charge 1.5 to 2 percent fee per transaction, which again needs to be split with master/visa and another bank. Whereas Amex charges 3.5 to 4 percent per transaction, biggest reason why most merchants don't accept Amex.
That fee is where all the reward points are funded from.
I agree. Problem is that not many retailers accept Amex.