Card rewards are generous in some countries and almost absent in others. The explanation lies in a fee most cardholders never see and never pay directly.
The fee that funds the card
Every card payment moves a small amount from the merchant's bank to the cardholder's issuer. That transfer is interchange, and it is the principal revenue behind free cards and reward programmes.
The merchant does not pay it directly. It is embedded in the total charge the merchant's payment provider levies, alongside network fees and the provider's own margin.
Because the cost sits with the merchant, cardholders experience the card as free. The cost is recovered in retail prices paid by everyone, including those paying cash.
Why regulators intervened
Interchange is set by the networks rather than negotiated between the parties who bear it. Merchants have limited ability to refuse a widely held card, which weakens their bargaining position.
Several jurisdictions concluded that this produced fees above competitive levels and imposed caps on consumer card interchange. Others left the market to set the rate.
The caps typically apply only to domestic consumer transactions. Commercial cards and cross-border transactions are frequently treated separately, which is why business cards remain more rewarding.
How caps change the card market
Where interchange is capped, issuer revenue per transaction falls and reward programmes shrink accordingly. Cards in those markets tend to offer thin cashback and few travel benefits.
Issuers respond by charging annual fees, by focusing on lending revenue, or by promoting card types outside the cap. The economics move rather than disappear.
Merchants in capped markets pay less to accept cards, which supports wider acceptance among small businesses. The trade-off between cardholder rewards and acceptance breadth is direct.
Why cross-border transactions cost more
A transaction where the cardholder and merchant are in different countries generally attracts a higher interchange rate. Domestic caps usually do not reach it.
The higher rate reflects both additional settlement work and a different regulatory perimeter. Merchants selling internationally therefore face uneven costs depending on where their customers are.
Some merchants respond by establishing a local acquiring arrangement in major markets. That converts foreign transactions into domestic ones for fee purposes.
What this means for comparing cards internationally
A reward rate that looks poor by one country's standards may be normal in another. The comparison is only meaningful within a single regulatory regime.
Surcharging rules also differ, with some jurisdictions permitting merchants to add a fee for card payment and others prohibiting it. These rules change periodically.
The underlying question in every market is the same: who funds the payment system, and how visibly. Different regimes answer it differently.