Originally Posted by Adam Smith

Credit card transactions don't settle (cash in bank account for the vendor) same day. It's typically 1-3 business days after the transaction. Let's say their deal with the Visa/Amex gets them 2 business days. They'll be restricted in what they can do with that cash since they have to pay it out within a day or so, and it will likely be in a non-interest-bearing account. Even if they make interest on the float (the cash they're sitting on), it's not going to be very meaningful. At 1% interest, if they're sitting on $1 billion (i.e. they're processing $365 billion a year of payments, which is a massive amount), it's only $10 million of interest. That sounds like a lot, but if they're taking a 0.5% cut on the transaction volume, that's over $1.8 billion per year, so the $10 million is a rounding error. Even if I'm off by a factor of 10 and they think they can run this on 5 bps instead of 50 bps (which they can't), that's still $183 million of revenue from net transaction fees, making the interest on the float immaterial.