Chapter 11

Who pays for your points

Published 29 September 2026

Ten chapters of receipts land on one question: who actually pays for the points, the lounges, the 5% back? Not the bank. The bank is the postman. This chapter names the senders.

Sender one is the merchant. On Visa and Mastercard, interchange in India runs 1.5% to 2% of every transaction, and it is the primary funding source for rewards. Spend ₹10,000 and the issuer collects ₹150-200, returns a slice as cashback, and keeps the change. But the merchant does not pay that fee - the merchant's price list does. Every customer, card or cash, subsidises the points economy at the till.

Sender two is the revolver, and this sender is the uncomfortable one. Cardholders carrying balances pay 36% to 42% a year, and a small revolver pool can outweigh a large full-pay base. The industry understands this perfectly and almost never says it in marketing: the disciplined transactor's free rewards are, in practice, partly paid for by people carrying expensive debt. Chapter 9 put the SBI Card numbers on that sentence. Chapter 10 put its own executives on the record.

Sender three is you, later

The third funder does not appear on any statement: your own future behaviour. A new card relationship often loses money in its early months - acquisition cost, welcome benefits, the funding cost of the interest-free period all arrive before the account turns profitable. Launch rewards are generous because issuers are buying customers, not rewarding them; devaluation is not an accident, it is a recurring feature of the model. The early perks are a loan taken against your future swipes, your future EMI conversion, your future insurance cross-sell - and the devaluations in the earlier chapters are the collection calls.

The exception that proves it

Watch what happens when the senders disappear. On RuPay and UPI-linked credit, MDR is zero or near-zero for many transaction types, and the reward economics collapse with it - a distinction card marketing almost never makes explicit. No interchange, no serious rewards. The equation is that naked: the perks were never a gift from the institution. They were a transfer, priced in basis points, from the merchant's till and the revolver's 42% to your statement credit.

So the dossier's thesis closes. The rewards were funded by cardholders and merchants all along - the institutions only ran the piping. What happens when the state builds a pipe of its own, and prices it at zero? That is the RuPay problem.