Most of us have heard the saying “there’s no such thing as a free lunch.” So when you hear that Fizz is completely free for college students and doesn’t charge interest, it’s understandable that you might be skeptical. After all, something has to pay to keep the lights on at Fizz headquarters.
First of all, it’s true that Fizz doesn’t have interest rates and doesn’t charge late fees, transfer fees, or anything of the sort. And to make things even better, Fizz is completely free!
Again though, Fizz is completely free if you sign up while you’re in college. You’ll never have to pay fees or interest and you won’t owe a monthly or annual fee. While companies like Discover, Chase, and Bank of America make college students pay them to use their products while charging you hidden fees and high interest rates, we don’t believe that college students should have to pay build credit and earn rewards. We want to reward you for getting an earlier start than most people.
So how does Fizz make money?
We make money from the interchange fees charged to merchants when you use your card. If you’re a little confused by that statement, you’re not alone. Let’s take a closer look.
The four main card networks are Mastercard, Visa, American Express and Discover. If you have a card in your wallet that you use to spend money, chances are that it’s in one of these four networks. Your Fizz card, for example, is a Mastercard.
When you use your Fizz card at your local coffee shop, the coffee shop doesn’t get to keep 100% of what you pay. In order to actually accept your Fizz card, the coffee shop has to pay a small percentage of your transaction to Mastercard itself. Fizz then takes part of that percentage. That’s exactly where we make our money. Still no fees, still no interest. We think it’s a better way of doing things than taking money out of your pocket and making it easy for people to go into debt.
How much does Fizz get?
The fee that Mastercard takes is only around 2% of each transaction, so the coffee shop in question doesn’t lose too much money by accepting cards. In theory, the additional business the shop brings in by accepting Mastercard is enough to make up for the fee they have to pay. Every card network charges their own fees, some higher than others. American Express tends to charge higher fees, which is why you might notice that some stores don’t accept American Express cards.
Some stores even charge an extra fee for using a credit card or a debit card. On the other hand, many stores have been known to increase all of their prices to try and offset the fee. Regardless, these fees aren’t paid directly by you as a Fizz cardholder. They’re paid entirely by any store or brand that accepts credit card - so you don’t need to worry about getting a bill in the mail just for spending your money.
Is there a catch?
There’s no catch. Fizz doesn’t charge fees and we don’t charge interest. We make all of our money from what Mastercard charges stores and from members who joined post-college (that’s right - even if you got your Fizz card as a senior in college, you’re grandfathered into the free version). And sure, about 2% of every transaction doesn’t seem like much, but those numbers add up over time. According to the Education Data Initiative, the average monthly cost of food for a college student is $547. Just 2% of that is about $11 every month from a single person, so imagine 1,000, 10,000, or even 100,000 people all using their Fizz cards every month. The more Fizz cardholders, the more we earn from merchants. It’s that simple.
We don’t want to brag about money, but we also think that it’s important to be transparent. There are too many cards out there that make money off of unknowing and naive students by charging hidden fees and sky-high interest rates. Fizz doesn’t do anything of the sort, and we want to make sure that you know that. It’s part of what makes Fizz the best option for college students, whether you’re looking to build credit, earn rewards, budget on your own, or all of the above. So join us, download the Fizz app, and get your card today!
Sam is a Kenyon College alum and is head of content at Fizz. He's been a go to personal finance resource among his peers since getting his first credit card during his sophomore year of college. He hails from Washington, DC, loves all things aviation, and currently lives in Los Angeles.