Most people miss the point that for a rewards card to pay you. You have to pay off the balance every month. And missing that by even a single month at 10%-21% interest that you get charged. You are more then likely to loose money even with the rewards.

if they're banking on a large percentage being online transactions, then the 1% could be covered or exceeded. Additionally, if they even break even on `transaction fees - cash back` then they make money on interest whenever someone can't/doesn't pay in full every month