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Thread: Credit card question

  1. #1
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    Credit card question

    If you pay the balance every month how do they make money if there is no interest.

  2. #2
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    Quote Originally Posted by Jay Jolliffe View Post
    If you pay the balance every month how do they make money if there is no interest.
    I believe the merchant pays a fee to use their services and this fee is passed on to the consumer. I think this is how it works.

  3. #3
    Credit card issuers and networks charge the merchant a combination of interchange or flat fees for each transaction.

  4. #4
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    Quote Originally Posted by Mike Kreinhop View Post
    Credit card issuers and networks charge the merchant a combination of interchange or flat fees for each transaction.
    Correct. This is why you sometimes see "cash discount" signs at gas stations and other businesses. And the fees vary, which is why some businesses won't take certain cards (discover for example).

  5. #5
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    I knew they were getting paid somehow..They wouldn't be doing it for free...

  6. #6
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    The credit card companies are much happier with their customers who don't pay off their balance each month; I think they make their real money from the interest charges.

  7. #7
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    That means that merchants increase their prices to everyone to cover that fee to the CC companies. So effectively people who use cash are helping pay for the CC fees anyway.

  8. #8
    Quote Originally Posted by Frank Drew View Post
    The credit card companies are much happier with their customers who don't pay off their balance each month; I think they make their real money from the interest charges.
    And since so few people pay in full every month, the CC companies don't care. Interest rates are so high that the CC companies are raking in enough money that they don't care about people who don't pay interest. That's why all the ads you see for credit cards are encouraging people to spend more money. It just keeps them flush with cash.

  9. #9
    Quote Originally Posted by Frank Drew View Post
    The credit card companies are much happier with their customers who don't pay off their balance each month; I think they make their real money from the interest charges.
    I agree....I think they probably make the vast majority of their money from interest..... I believe if everyone paid their account in full every month the credit card companies would be out of business...

  10. #10
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    Quote Originally Posted by Barry McFadden View Post
    I agree....I think they probably make the vast majority of their money from interest..... I believe if everyone paid their account in full every month the credit card companies would be out of business...
    I suspect they would just up the transaction and card fees. This would cause merchants everywhere to increase prices to cover the fees. Thanks to those who carry a balance for doing their part to keep prices down!

    Those who never carry a balance are known in the credit card industry as "Deadbeats." The credit card companies hate 'em; the credit rating algorithms love 'em.

    DEFINITION of 'Deadbeat' A slang term for a credit card user who pays off his or her balance in full and on time every month. A deadbeat, also called a “nonrevolver” or a “transactor,” gets this derogatory name by being a potentially less profitable customer for a credit card company than a revolver, or someone who carries a balance from month to month.

    More, and how they still make money from the Deadbeats:
    http://www.investopedia.com/terms/d/deadbeat.asp

    What I find fascinating (and somewhat difficult to believe) are the average balances and the statistics on who has credit card debt. For example, look at the average debt by household income:
    https://www.valuepenguin.com/average-credit-card-debt Incredible.

    I use a card for almost everything, farm equipment, building materials, tools, wood, feed, vet bills, etc., and just pay it off every month. The frequent flyer miles from this are usually more than we can use and cover all our vacation flights, domestic and abroad. My wife uses a different card the same way for miles from a different airline so we have more travel flexibility. I know a guy who made all his house and property payments with AMEX just to rack up miles. Anyone who likes to travel and doesn't get miles from a card is missing out!

    JKJ

  11. #11
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    I guess I'm a deadbeat...no balances. 850 credit score. I rarely carry a balance and in those few instances where it's occurred, it was a major purchase with a planed payment over say, two months or three months on purpose for budgetary reasons. (by example, I split our whole house generator over two payments and gained a boatload of points that pretty much covered the little bit of one month interest on half the balance)
    --

    The most expensive tool is the one you buy "cheaply" and often...

  12. #12
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    Incidentally, studies show that we spend more when we use plastic as opposed to cash. That's why fast food restaurants starting taking cards a few years back. It seems that swiping a card doesn't register with our pain center in the same way that pulling cash out and handing it over does.

    https://www.nytimes.com/2016/03/27/y...ades-away.html
    "Live like no one else, so later, you can LIVE LIKE NO ONE ELSE!"
    - Dave Ramsey

  13. #13
    https://www.reddit.com/r/churning/ i make about 4k a year using many credit cards that doesn't even include the usual % back on every purchase like when i bot my tools from minimax i got $500 + 2% back off the order.

  14. #14
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    Believe me they make zillions on the merchant fees. Just imagine how much is spent on Amazon and Ebay every single day, one to two per cent of that is immense. My own company pays over 50 grand a year in merchant discount fees but very few businesses can afford not to take charge card payments.

  15. #15
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    Quote Originally Posted by Allan Dozier View Post
    Believe me they make zillions on the merchant fees. Just imagine how much is spent on Amazon and Ebay every single day, one to two per cent of that is immense. My own company pays over 50 grand a year in merchant discount fees but very few businesses can afford not to take charge card payments.
    I know of one company that lost at least $20K in purchases from me alone when they quit taking AMEX - they didn't want to pay the fees. OTOH, my eye surgeon signed up to accept AMEX in '99 because I wanted to use it for LASIK surgery.

    JKJ

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