Skip to main content

View Diary: Obama vs. Usury?  Why Not? (Updated) (251 comments)

Comment Preferences

  •  I gathered that your point was (0+ / 0-)

    that credit card companies liked customers who paid off their balance every month on time and never exceeded their credit limit. I, on the other hand, labeled these none finance charge paying customers as "bad" customers in the sense that the credit card issuers do not make as much money off them.

    I may have misinterpreted your previous diary, and if I have, I apologize. However, I would ask you how much a credit card company would charge for its services if everyone paid their full balance off every month, never had a customer incur an over limit fee or late fee. I do not think credit card issuers would be happy if their income was just limited to fees charged unless they raised them to a point where "bad" customers decided to cancel their cards and use cash

    •  I told you... (0+ / 0-)

      ...CC companies and banks make 1.5%-2% on every transaction that is ever processed, no interest, no fees, nothing. If you buy a $100 item and pay the balance off that month, the CC issuer makes $2 or so.

      If a person charges $1000 a month and pays it off that month, the credit issuer makes 2% or so a month, which equates to $240 per $1000 invested. This is very profitable; CC issuers don't need the interest or fees, and often prefer that they not be charged because they equate to a default risk.

      •  American Express tried that business model (0+ / 0-)

        It did not work out well in comparison to other credit card issuers.

        You may be privy to insider financial data on the banks that offer credit cards. But it seems to me there are costs associated with processing credit transactions and maintaining the networks and computers throughout the world, not to mention the costs of billing and collection and the cost of capital associated with paying the merchant in advance of receiving payment from the purchaser. You also ignore the costs of getting more credit card customers to maintain or increase cashflow. So saying they 'make 24% on the money invested' is a trifle misleading.

        But, if I just accept what you say, why would they entice credit card holders with teaser rates of 0% or 2.99% to promote borrowing money. Why would they bombard me with checks to encourage me to use as much of my credit limit as I can? Why does DiscoverCard refund up to 1% of my purchases and in some cases 5% of my purchases? They are banks that make their money by lending money at interest.

        Oh, by the way, why wont Macy's give me a 1.5% discount if I pay cash? According to you, they would be ahead of the game by 0.5%. There is a gas station down the street from me that gives me a 10 cent per gallon discount if I pay cash. Why not Macy's?

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site