Credit Industry Insight?

Discussion in 'Credit Talk' started by spyguyjim, May 15, 2000.

  1. spyguyjim

    spyguyjim Guest

    (This is a partial repost from earlier but I wanted to give it a new topic line and get away from the this card vs that card debate.)

    Isn't it true that credit card companies make a "small" percentage on all transactions? The idea you need to pay the credit card company more money in interest to get a credit increase seems rediculous. If you pay your bill off every month, that should demonstrate your ability to pay higher sums each month. It makes no sense that they see someone making smaller, partial payments as a better credit risk.

    It would sure be interesting to hear from someone in the credit card industry for more insight.
     
  2. J. Edgar

    J. Edgar Well-Known Member

    >Isn't it true that credit card companies make a "small" percentage on all transactions?

    That's correct. They get a small fixed fee (50 cents or so) plus a small percentage (between 1 and 2 percent for larger merchants, upto 5-7 for smaller merchants).

    >The idea you need to pay the credit card company more money in interest to get a credit increase seems rediculous. If you pay your bill off every month, that should demonstrate your ability to pay higher sums each month. It makes no sense that they see someone making smaller, partial payments as a better credit risk.

    This is a very logical argument, but that fact is the issuing bank's profits come from finances charges and those hugely inflated fees for late payments and being over your limit. This is the primary reasons why nearly all airline affinity cards (the ones that give you frequent flyer miles for purchases) charge an annual fee and a high (18%+) interest rate. The people that hold these cards are generally affluent and typically pay them off every month.
     
  3. creditwork

    creditwork Well-Known Member

    You are right, making full payments is the best for you, but not for the credit card company. They want to make money, if you do not carry a balance, they do not make money. Take Amex, why do you think they have come up with all of these other cards that allow you to carry a balance?
    Because the yearly fee and the transaction fee from the merchant is not enough. So it is not about your good credit is about them making more money.

    http://www.creditsense.com
     
  4. BLJ

    BLJ Guest

    Don't forget that the term used by banks for people who pay their credit card
    balance in full each month is "DEADBEAT".
     

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