Assume that the cardholder is an average American, and gas is $4 a gallon. Further assume that he always fills up at Shell (which isn't a forgone conclusion, as he probably shops around to find the cheapest or most convenient gas stations). Shell squeezes another five gallons of gas out of him, for an increase of $20 from what he'd otherwise spend. The cardholder then receives his statement credit, worth $2.25. Shell gets nearly ten times what it pays out in rewards.
BP takes a cut every time its card is swiped
BP, on the other hand, wants to encourage its cardholders to spend everywhere. It earns a substantial proportion of the interchange fee assessed on every transaction, and pays out a fraction of those earnings in rewards for the cardholder. The BP credit card pays out 5% in rewards on its own gas, of course, but additionally gives 2% for travel and dining, and 1% elsewhere. These rewards rates encourage cardholders to use the cards for more purchases, thus increasing BP's interchange revenue.
An expansion of branded credit cards
A number of retailers are adopting both Shell and BP's methods of capitalizing on customer loyalty. Merchants from American Eagle to Gap offer store credit cards that give additional rewards when cardholders shop at the retailer. These cards help to keep customers coming back for rewards and perks. The Wharton School cites creating a separate currency, from rewards dollars to airline miles, as one of the most successful loyalty programs. Other retailers, like Target, focus on the BP strategy.
The company hands over a portion of its revenue to card networks in swipe fees, but by issuing its own credit cards, it can keep some of that fee in-house. As the interchange debate rages on, and merchants struggle to keep customers coming back, it's possible that credit card lending may shift from wary banks to more eager stores.
Anisha Sekar is a staff writer for NerdWallet, a credit card website that helps consumers find the right low interest credit cards for their spending habits.