I think you are neglecting the fact that, even if some people don't carry a balance, most credit card users do, and the rewards scheme acts as an incentive (perhaps not a rational one, but people demonstrably don't behave rationally) to additional use of the card, all other things being equal. So, credit card issuers probably make up the additional costs of rewards cards in interest and fees from those cardholders, on average, even though perfectly disciplined use provides a net win to the cardholder.