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Contrary to popular belief Banks are not charities. People that charge a couple hundred a month and pay off their balance each month generate no profit. A credit card is a product, if you just charge on the card here and there and always pay it off you are going to need to start paying for the product. Seems far enough.
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Originally Posted by user_id
So to demonstrate I'm wrong, you yap about revenue without taking into consideration the costs? Yes, credit card companies get merchant fees and perhaps what you said would make sense if the following things were free:
- Networking
- The development and maintenance of a banking system
- Cost to store relevant data
- Cost to provide consumer predictions
- Cost to mail statements each month
- Costs associated with customer service
- The cost to process a payment
and so on. But they are not free. If the card is a rewards card then credit card company is getting around .8%, if you are charging an average of $200/month that is a whole $19.2/year in revenue. If its not a rewards card then they get around 1.6%, for a total of $38.4. Just mailing statements and processing payments is likely to cost the bank around $20~$25/year, not to mention all the other costs.
So, as I said. A costumer that only on average charges $200/month and pays off their balance each month is not in general profitable for a bank. These are the people that are going to be targeted with annual fees. On the other hand people that run a balance, or have charges in the $400+/month range are unlikely to be targeted.
Now, some banks/credit unions may be willing to eat the costs to keep your business on other fronts.
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Originally Posted by las vegas drunk
This is not true. Every time you make a purchase on the card, the credit card company charges a fee to the merchant. So even if you pay off the balance in full each month, the credit card company still makes money.
The cost of doing business is always figured into the bottom line in every business. The merchant pays, the customer pays, and/or any other middleman pays. The banks made the rules and now they are about to choke on them. The Credit Card bubble is the next one to burst and most banks are running for the hills to avoid the end game and losses.
Does someone in this thread work for a bank? Sure seems like they do.
And you are somehow entitled to do this for free? No-fee cards are going to die a slow death if other revenue sources for the companies dry up. These companies exist to make money for their owners, not to offer you a convenient form of financial transaction.
Get over your entitlement mentality, please. It's dragging this country down.
They offer it and I tke advanatge of the offer. No reason to feel envy. Anyitme they want they can change the terms and I will then decide if its worth it to me.You attitusde is just draggiung you down and the companies are big boys knowing what they are doing.I would say right now its those not are paying their bills that is the entitled generation;not those that they can close the accoutn anytime they want with no problems of collecting.Why do you think they are lowering limits onthsoe and raising their interest;to encourage them to pay off the bills.The we are likely to see them close those accounts and start a fee for use and limit those that they finance like any other credit.
So, what are you advocating here? That we don't pay our balances and pay them interest so they can make money? Sorry, I don't buy it.
Huh? I'm not advocating you do anything. Rather I'm explaining why credit card companies are charging annual fees for some users. And as I noted earlier, its users that do not charge much AND don't carry a balance that are likely to be effected. Depending on the details of the card someone that charges more than 400~500/month and pays their balance each month is likely to be marginally profitable.
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Originally Posted by Moonlady
I work for a large company. Some of our accounts are more profitable than others.......
What is your point? The issue here is that the sorts of accounts I mentioned are not profitable at all.
I have no problem paying annual fees for the right service. My gold card has an annual fee and its well worth it.
The banks get you coming and going and in the middle, and they can do it because they own the most corrupt government on the planet. They simply have to own a majority of the 535 stooges, I mean members of Congress, and the fix is in.
I take no issue with fees on cards, I have a big issue with the banks adding them mid step after you've already signed up for their service and been using it.
Closing a card impacts your credit which then impacts your ability to obtain another credit card should you desire to.
If I signed up for the cheap cable and Time Warner says I now have to pay an additional fee because I'm not buying any pay-per-view movies I'd be pissed.
Credit cards were originally designed to be paid in full every month.
But you knew that going into the game, they didn't impose it on you after the fact.
But you can always close an account. And if you're worried about your credit rating (people make too big a deal about this number anyway - but that's another issue), then open another account before closing the problem one. There is still lots of competition for business out there.
Closing a credit card does not effect your rating much at all. You can take it from me who has a FICO score of 825.
The only way I would pay an annual fee for a credit card is if they gave me huge perks. There are plenty of cards out there that offer very good perks with NO fees. I have never in my life paid an annual fee and don't plan on it unless all credit cards charge them across the board.
My wife and I charge everything in the world on one credit card and then pay it off at the end of the month. Gas, groceries, restaurants,gifts,water bill, electric bill,car insurance,home owners insurance,cable bill,etc. We get back thousands of dollars for free because of the great perks our card has. I have often wondered how the banks are making any money off of us. The way I understand it is the credit card companies make the money off the swipes. The banks issuing the credit cards make the money off of the annual fee some cards charge, the interest, overage fees, balance transfer fees, etc.
In our case we don't pay any of those fees so only the credit card company makes money off the swipes and not the actual bank issuing the card. Maybe the actual credit card company "sponsors" the perks that the banks offer? So the CC companies give back money to the banks? I could see them trying to charge us an annual fee. However, if they do, we will move on because there are plenty other cc's that don't charge the fee and we will just switch.
I would cancel my card at the drop of a hat if they levied an annual fee to use it. If they all charged a fee, I would no longer maintain any credit card. It's a convenience, not a necessity.
Closing a credit card does not effect your rating much at all. You can take it from me who has a FICO score of 825.
Tell me, how does having a high FICO score imply you have any knowledge of the the algorithm? It does not and you obviously don't. What you are saying is wrong, whether closing a card effects your FICO score or not depends on the details of your credit report.
Depending on the details, closing a card could have a dramatic effect on your score!
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