Recently, supposedly because I have an excellent credit rating, my credit card company issued me a Platinum Mastercard at 7.75% interest that gives back 1% of all purchases annually. Of course, it also has no annual fee.
How do they make money doing that? I had my standard credit card with the same company for the last 15 years, and recent history indicates that I always pay off my entire balance. Given that, it's as though *they* are paying *me* for the privilege of me using their card.
I'm not complaining! I just want to know if anyone can tell me the credit card company's financial rationale for paying me to use their card.
2007-11-14 03:23:55 · 8 answers · asked by Happy-2 5 in Business & Finance ➔ Credit
Two ways.
One. The merchant pays a percent of the purchase price to the card issuer for providing the credit that enabled the sale to take place. This is like a marketing expense for the merchant.
Two. The credit card company is not trying to make money off of YOUR card; we are trying to make money off of the credit card service as a whole. When we offer rebates, we know some people will pay in full and on time. But, they know that a certain percentage of their customers, lured by the rebates, will pay the minimum, will be lat (and pay late fees) and go over the limit (and pay over the limit fees). Don't worry. We bankers are not losing money.
2007-11-14 04:45:49 · answer #1 · answered by Ted 7 · 2⤊ 0⤋
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2016-07-21 02:40:26 · answer #2 · answered by Ronald 3 · 0⤊ 0⤋
The Discover Card also makes money off of you by using double-cycle billing. Here's an explanation of how this works:
"With double-cycle billing, practiced by a third of the credit card issuers studied by the GAO, consumers are charged interest on debt that has already been repaid. As an example, imagine a cardholder who begins a billing cycle with a zero balance, charges $500 on his or her credit card and makes an on-time payment of $450. Under double-cycle billing, he or she would be charged interest on the full $500, rather than on only the $50 that is still owed."
This might also be the case with your new credit card. Read the fine print carefully. If you carry a balance, you might be better off with a card that doesn't offer a rebate.
2007-11-14 05:27:39 · answer #3 · answered by Heron 5 · 2⤊ 0⤋
The credit card company gets a fee from every transaction from the retailer, in the range of 3 to 6%. So they will make money either way. I have a BP credit card that pays back 5% on transactions at BP gas stations as well as 1% on all other transactions. I love it. It is great as long as you pay the bill in full every month as I do.
2007-11-14 03:32:38 · answer #4 · answered by countryguyhfc 5 · 4⤊ 0⤋
the credit card company charges the vendors a percentage. i think it is 3 or 4 %. so the credit card comp is not losing.
The benefit to the vendor is that tehy hope that credit card would lead customers to buy more than they would usually buy.
But now folks use the credit card in order to gain reward points or cash back. This is why vendors are complaining about the fees because they feel as if they are unfairly paying for the rewards and cash back
2007-11-14 03:45:21 · answer #5 · answered by D. J 2 · 2⤊ 0⤋
The 3-6% reported by others is a bit high. For most larger merchants, they pay anywhere from 1% to 2% for processing fees. AMEX cards do go as high as 5%. On-line porn websites probably pay 5% to 10% due to the high fraud charge backs.
Affinity cards from your petrol company are paying you a loyalty dividend.
Some cards like Discover Card (don't use them) pay you a partial rebate of your finance charges.
2007-11-14 05:13:10 · answer #6 · answered by Anonymous · 2⤊ 0⤋
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2017-03-06 04:39:50 · answer #7 · answered by Oates 3 · 0⤊ 0⤋
The Highest Paying Surveys : http://OnlineSurveys.uzaev.com/?isDM
2016-07-07 10:19:03 · answer #8 · answered by ? 4 · 0⤊ 0⤋