When you use a reward card, the merchant is charged a higher fee than if you used a “normal” card. Simply by putting a different branding on the plastic you pay with, the credit card issuer gets more money from each transaction. - HN

The simple reason why issuers don’t make every card a signature rewards card is that merchants would revolt.

The interchange fee schedule[1] is fascinating. Dozens of categories of merchants with different rates. There is no technical reason for this. Fraud costs are borne by merchants and to some extent processors, but not the issuer banks that receive the interchange fee.

The fee schedule reflects a kind of battle for customers. It’s worth repeating that most of interchange for these higher end cards is passed back to the customer in the form of rewards. Essentially, merchants are willing to pay higher fees to support the cards that higher spending customers prefer.

But there is a limit. We can observe that not all merchants accept AmEx, which has some of the highest interchange rates. If every visa/MC card were a signature card, more merchants would push back.