Something I've always wondered about - and I've heard differing opinions:

A bank issues a credit card, and when you buy something they give you miles. You pay off your balance, thus incurring no cost.

Here is my question: How does the BANK make money? I've been told that the 2% (or whatever) processing charge goes to the Credit Card processor - like Visa or Mastercard - not to the issuing bank.

Does anyone know for sure if this is true, or how it works?