[Art_Vandelai]

I'm sure most of the folks who frequent PO.com pay their credit card bills off on time, and in full every month.

Soon, I fear, this type of behavior, which is unprofitable for the credit card issuers, will lead to issuers unilaterally cancelling their customers' credit cards.

According to the comments on this BBC article, a major internet bank is doing just that, under the guise of "unacceptably high risk".

Therefore someday will only those who carry a balance and pay ridiculous credit card interest charges be able to utilize the convenience of credit?

[Iaato]

Ask, and you shall receive, Art. In the end, I think credit cards are history. There is no real middle ground. The only people in a depression who do not abuse credit are those who pay them off every month.

$this->bbcode_second_pass_quote('', '"')CREDIT card customers who pay off their balance each month are as much risk from being cut off by their lender as those that have lost control of their spiralling debts..

Credit checking agencies say banks are beginning to weed out customers with faultless borrowing histories because they can make little profit on them.

It comes as credit card company Egg was accused of withdrawing cards from some of its most responsible customers as part of a cull of those said to have a "higher than acceptable risk profile".

The lender, part of US investment bank Citigroup, wrote to 161,000 customers - 7% of its total base - last week to warn them their cards would be withdrawn in 35 days. They can still repay balances over time."

[PopeGideon]

I'm not buying it. It can't cost more than a few bucks a year to have customers who have no activity on the card.

Why would they throw away business?

Seems to me they'd be better off charging you their exact costs, plus a few bucks, if you don't use your card enough.

Not buying it.

[RedStateGreen]

Sounds like they do have activity, but the cc companies aren't racking up the interest because these customers pay the whole thing off every month... like we do.

Ha! If they cancel our cc it would be more inconvenient but it wouldn't bother us much otherwise.

[BigTex]

Most of their revenue comes from fees paid by retailers.

Most American Express card holders pay their balance every month--that was the original idea with the American Express card: no interest, pay an annual fee and pay your balance every month.

I think the customer they don't like is probably the one that doesn't charge very much AND pays it off each month.

[LoneSnark]

That is right. From what I read most of a credit card companies revenue comes from fees paid by retailers. Everytime you swipe your card the retailler pays between 1% and 5% of credit card purchases to the credit card company for the honor of accepting credit cards. That is why my favorite restaurant stopped accepting credit cards when it fell on hard times.

People that carry a balance every month are at risk of defaulting. Yes, the company earns a lot of interest right up until the day you stop making payments; but if your balance exceeds the interest paid before now the company has lost big.

As it was explained to me, many card companies hate customers that carry a balance because it cuts down on retailer fees.

Math example:
Two customers are issued identical cards with $1000 spending limits. Customer A spends $1000 each month and paid it off. Customer B carried a balance of $1000 from the previous year and then carried the balance all year at 12% APR, spending cash for everything because his card was maxed out to begin with. Which earned the company more money this year?

For this example I will assume the fee is the bare minimum, 1%. During the year customer A spent $12,000, earning the card company $120 in retailer fees (note he paid no interest). Person B spent nothing this year on the card, so he collected no retail fees. But, he did pay 12% interest on $1000, or $120.

So, in this narrow example, both customers earned the card company exactly the same amount of money. One did so by collecting the money from retailers, the other did so by paying it directly as interest. Either way, the card company makes money by keeping balances high, whether they are paid off every month or not is irrelevant.

[eastbay]

Therefore someday will only those who carry a balance and pay ridiculous credit card interest charges be able to utilize the convenience of credit?

Hi Art,

By 'credit', I assume you're talking about 'credit cards.'

Well, other than for periodic internet purchases, I don't use my one (1) credit card. In fact, if it wasn't for the internet, I would have no use for it at all. I bet many of us here are in the same boat. The balance is always paid to zero. I'm a perfect candidate for getting my card yanked. I thought about this when I read it on BBC earlier today.

If they pull my card, it will have almost no effect on my life. Come and get it.

[frankthetank]

I'd fall in this category and i'm not buying it. They make money off the retailer for what you buy. Thats why a lot of times you get a break at some gas stations when you pay cash (with a coupon usually, at least thats how it is around here).

My bills come electronically, i'm a couple of bits of data in their massive system.

If i was them, i'd be more worried about those that carry over $10000 balance skipping town.

[cube]

$this->bbcode_second_pass_quote('LoneSnark', 'T')hat is right. From what I read most of a credit card companies revenue comes from fees paid by retailers. Everytime you swipe your card the retailler pays between 1% and 5% of credit card purchases to the credit card company for the honor of accepting credit cards. That is why my favorite restaurant stopped accepting credit cards when it fell on hard times.
..................................
So, in this narrow example, both customers earned the card company exactly the same amount of money. One did so by collecting the money from retailers, the other did so by paying it directly as interest. Either way, the card company makes money by keeping balances high, whether they are paid off every month or not is irrelevant.

[topcat]

Good point on the divide btw the bank and cc company Cube.

Another issue the bank has, not only it will not make any interest on my $1,000 every month, it has to consider the 'cost of money' for that $1,000 they have lent out.

[LoneSnark]

No, it does not work that way. It is a negotiation to divy up which fees go to which company, the bank or the card. I doubt that VISA managed to negotiate all the merchant fees for itself, especially since banks are offering cash back on every purchase to customers. If it demanded such a concession then banks would go to Mastercard for a more favorable deal, or Discover, etc.

[jdmartin]

Well if they hate those customers, then Citi and Chase must despise me. I have one of each, one in a Shell MC the other in a BP Visa. I commute a long way and drive past Shell every day, which is where I get my gas. I get 5% back on the gas. My wife drives past BP every day going to work. We get 5% back on the gas. She also uses the BP for all budgeted expenses - food mostly. We get 1% back on that.

When the bill comes in I have a detailed tracking of all expenses for the budget. I pay both bills in full, every month. I always know how much the bills are because they contained budgeted items, ie things I was going to buy anyway.

To date I have paid $0 in interest over the past 2 years and have received rebates from the credit card companies of over $1000 total. Now that's doing business