Respectfully, I believe that LonesomePolecat is at least partly correct. You are correct that the companies collect a percentage of each sale, but that isn’t where the real profits are. The companies want card holders to be “revolvers” - people who carry a balance from month to month, and pay the exorbitant interest rates.
Several years ago I was listening to NPR with a correspondent who analyzed the credit card industry (sorry, can’t remember the name so no cite). Over the past 10 to 15 years there has been a shift in the industry. In the past all credit card companies had an annual fee. Accordingly there was less pressure for one’s account to be “profitable” with the company knowing that there was a steady income stream.
Then some companies began dropping the annual fees, and eventually most of them did. Or so they would have you think. Instead, they relocated to states where interest rates approach that of usury, and increased their profits there. They also increased the late payment fee; their reasoning was that one late payment per year equals an annual fee. They also shortened the time between billing and payment due, hope to get a late payment fee there.
Therefore, if you pay off your bill in full and on time every month, their only profit will be their percentage of each sale. That percentage is further reduced by any rewards programs that they offer.
In effect, the cost of processing a bill for a card holder is virtually the same irrespective of the amount that is charged. I’ll guess that the term “deadbeat” is really reserved for those who make minimal purchases, where the cost of processing the bill equals or exceeds their percentage, but I have definitely heard that that term is used by the credit card companies.
Ah, so 87 cents is the magic number. I overpaid mine by $20 two months ago, and they increased the credit limit by $500. WTF? I didn’t ask for an increase, I rarely use the blasted thing.
Yeah, I watched that epi of Boston Legal, too. Perhaps we shouldn’t get our info from TV shows, eh?
Like I said- of course CC companies would *rather * you carry a balance- and Car dealers would rather you come in and buy a new car every model year. But even if you just buy a new car once every decade, they are still happy to get your business. As I also said- some “bottom feeders” in the CC biz do rely more upon fees and high interest- but most do not.
I have the same expereince with my CC company (it is an REI card, so I get REI “credits” by using it) as Mama Zappa- I charge quite a bit, then pay it all off. They love me, and do a lot to keep my business. My interest rate even if I do carry a balance is quite low also, and there is no fee. It’s from a major, reputable bank, not a “bottom feeder”.
Any reputable CC company is fine with you charging (a lot, please! sure) and paying it off every month. They don’t think of you as a “deadbeat”, they think of you as a "good customer’. "Bottom feeders’ are different, true- and some of you dudes have only expereince with those companies.
The phrase “deadbeats” for people who carry no balances was introduced (or at least publicized) to non-industry people by a 2004 Frontline report titled The Secret History of the Credit Card, which I highly recommend to just about everybody who has or is considering having a credit card.
So basically DrDeth can shove his rolleyes up his ass.
I Read the entire NYT article. No-where does it has any CC company use the term “deadbeat” to refer to customer who pay off their balances every month.
I read the site too. There was one CC industry dude that did say “But certainly it is the cardholders who revolve, who use the debt, who pay finance charges, who contribute, cover the overhead, provide some profit for the lender. So someone who always pays in full in 30 days, 45 days, doesn’t incur any charges of any kind, has the card for free, the bank does get some income from that because of the way the clearing relationship with a MasterCard and Visa is structured. Basically, the stores, the merchants, are paying a little bit to that bank, but it’s not enough to cover the costs, or not more than very barely.” and sure, they would prefer you to be a “revolver”, but they are OK with you paying in full every month.
Mr Kahr (the CC company dude) even said about the term “deadbeat”: Frontline:"The fundamental profitability of the industry is on the revolvers, the people who don’t pay in full.
Kahr:Yes.
And if you pay in full it’s very hard for the companies to make money.
Right.
And is there a term that you use in the business to describe the people who, let’s say, pay in full and aren’t good for very much in terms of profit?
*Oh, I’ve heard various words used. I would call them non-revolvers. *
Deadbeats. A deadbeat is somebody who doesn’t make their payments. But I’m told that in the credit card industry, or among some groups in the industry, deadbeats are those who actually do pay off their card debt.
*I wouldn’t get that emotional. I don’t get into characterizations.
No, but it’s the flipping of the word. That’s what I find interesting. The definition flips, if you will.
*
I think people who don’t pay are known as deadbeats. Referring to non-revolvers as deadbeats strikes me as inappropriate."*
And later Elizibeth Warren sez:“Eighty-five percent of the credit card company’s profits come from people who are making payments over time. It comes from interest and fees. … It doesn’t come from something that the merchant is paying or … annual fees … that the top 10 percent [pay], because they’re not paying it.”
So if 85% of the profits come from those who make payments, that leaves 15 % of the profit from those who pay off monthly. What industry is going to shit on dudes who provide 15% of their profits- *at 0% of their risk? * (That’s the cool part, as the other 85% runs at a rather high rate of risk.)
And it goes on. Read your own damn cite. In other words, it’s *Frontline * who uses the term “Deadbeats” not the industry. Cram that up your ass.
I Read the entire NYT article. No-where does it has any CC company use the term “deadbeat” to refer to customer who pay off their balances every month.
I read the site too. There was one CC industry dude that did say “But certainly it is the cardholders who revolve, who use the debt, who pay finance charges, who contribute, cover the overhead, provide some profit for the lender. So someone who always pays in full in 30 days, 45 days, doesn’t incur any charges of any kind, has the card for free, the bank does get some income from that because of the way the clearing relationship with a MasterCard and Visa is structured. Basically, the stores, the merchants, are paying a little bit to that bank, but it’s not enough to cover the costs, or not more than very barely.” and sure, they would prefer you to be a “revolver”, but they are OK with you paying in full every month.
Mr Kahr (the CC company dude) even said about the term “deadbeat”: Frontline:"The fundamental profitability of the industry is on the revolvers, the people who don’t pay in full.
Kahr:Yes.
And if you pay in full it’s very hard for the companies to make money.
Right.
And is there a term that you use in the business to describe the people who, let’s say, pay in full and aren’t good for very much in terms of profit?
*Oh, I’ve heard various words used. I would call them non-revolvers. *
Deadbeats. A deadbeat is somebody who doesn’t make their payments. But I’m told that in the credit card industry, or among some groups in the industry, deadbeats are those who actually do pay off their card debt.
*I wouldn’t get that emotional. I don’t get into characterizations.
No, but it’s the flipping of the word. That’s what I find interesting. The definition flips, if you will.
*
I think people who don’t pay are known as deadbeats. Referring to non-revolvers as deadbeats strikes me as inappropriate."*
And later Elizibeth Warren sez:“Eighty-five percent of the credit card company’s profits come from people who are making payments over time. It comes from interest and fees. … It doesn’t come from something that the merchant is paying or … annual fees … that the top 10 percent [pay], because they’re not paying it.”
So if 85% of the profits come from those who make payments, that leaves 15 % of the profit from those who pay off monthly. What industry is going to shit on dudes who provide 15% of their profits- *at 0% of their risk? * (That’s the cool part, as the other 85% runs at a rather high rate of risk.)
And it goes on. Read your own damn cite. In other words, it’s *Frontline * who uses the term “Deadbeats” not the industry. Cram that up your ass.
Thank you Brian! Yeah, that’s the guy I heard on NPR radio, being interviewed in support of this Frontline show.
I don’t deny that those who pay in full and on time can be very lucrative customers. For instance, I do just that. However, I put everything, and I mean everything that I can on the credit card. I use it as a debit card, but with rewards. My monthly bill can be between $1500-$2000. So, my rewards are $15-$20, and their monthly income is $30-$40. That works out to $360-$480 annually; an annual fee would be of little extra to them, but would be a deal-breaker for me. Considering that it can take hundreds, or even thousands to attract a new card holder with good credit, this is win/win for the card holder and the credit card company.
Contrast that with someone who charges $10-$20 per month. Their income wouldn’t cover processing or mailing charges. Those are the folks the companies would like to kick to the curb.
DrDeth, take that quiz in** Bryan’s ** link. Specifically, Question 4. The industry may deny that they use that term, but LonesomePolecat certainly didn’t make it up.
That’s about what I do. That’s around $400 a year per “non-revolving” customer risk free income. Nice.
So? Where’s the cite with someone from the CC companies using that term? It seems to be something Frontline can’t get verified. When they really tried to get Kahr or use or verify that term, he claimed otherwise. LonesomePolecat may not have made that term up, but show me a cite that proves that Frontline didn’t make it up. A Google search shows that Consumer groups say that CC industries use that term to refer to “non-revolving” but the only time I have seen that term applied to a customer is a non-paying customer.
If someone can come up with a cite that quotes the *CC industry * as calling “non-revolvers”= “deadbeats” I’d like to see it.
I have shown cites that CC companies do make a small but tidy profit off "non-revolving customers’ and both my purchasing history and yours confirms this.
Any balance, not just the outstanding balance - because what’s to stop you from running the card up again. They credit limit on your card is (at least in theory) tied to your ability to pay the debt off. If they take your wife’s name and liability off the card, they have to discount her credit history and income, as well.
At this point, Frontline has about one billion times more credibility than you, rolleye-boy. Plus their report shows Ben Stein telling an anecdote about something an associate of his (who worked for a CC company) said, so I stand confidently by my earlier post.
So far, no one- including Frontline or the NYT- has come up with an actual cite of the CC industry using that term. :dubious: In fact, the one CC indusrty spokesperson they did interview said that they didn’t use that term, there was no reason to use that term, and it’d be inapropriate to do so.
So, come up with a cite that they do, and show your credibility. Frontline is a fine news org, but even they are capable of a little sensationalism at times.
And just for you: :rolleyes: :rolleyes: :rolleyes: :rolleyes: :rolleyes:
Look, Frontline knows it has to quotes sources too. They completely failed to come up with a verifyable source for this. Without “We interviewed *Ms Jane Doe Vice President of ACME CardServices * and she said the industry used that term”, they failed.
“Deadbeat” is already commonly used for dudes who don’t pay. It’d be silly and confusing to use it for dudes who DO pay.
It’s possible that Ben Stein might have overheard someone using that term, but that’s a “FoaF”, and worthless. If they are going to quote Ben, they have to quote him as saying “I heard that term from *Ms Jane Doe Vice President of ACME CardServices *”.
And Frontline has been in business for decades, and they know better. :dubious: If they had been able to come up with a verifiable source, they would have, and it woudl be cited in that article. The fact that neither they- nor the NYT or any other media my Google-fu* can find- has been able to do so; shows that it’s an Urban Legend. Or at best an off hand comment by some mid-manager or lower, not indicative of industry practices & terms as a whole.
and schmuck I may be, but my Google-fu is pretty damn good.
Can I say a big fuck you to Citi as well? I’ve got an AT&T card that I’ve had for fifteen years now. A couple of years ago AT&T sold it to Citi, for awhile it was ok, I never really cared. Just three weeks ago they totally fucked up everything. I bought a large item, it cost almost $2000. I planned on paying it off right away. Two weeks ago I tried to pay it online, except they used an old bank account number that was supposed to have been deleted. So it went to my account that I use for lunch and shit like that, not very much money in it at all.
So what happens? The fuckers try and take out money twice! But because I don’t have much money in it it bounces. They tried to take money out twice, so I got two bounced fees, $25 each. When I call them on it they say they keep trying to take money out a number of times. So I had to put a stop on my bank account costing yet another $25. They come back and charge me another $50 for the bounced charge that shouldn’t have happened in the first place.
Now I can’t pay my bill online because of it. So I mailed them a check, they sent the fucking thing back to me! They must not want my fucking money at all. So today, the second time I’ve called about this, they tell me that they can not restart my online billing for a month, yet they don’t want my check either. They told me they would give me five extra days, except I can’t pay my bill until well after it’s due costing me even more money.
I should over pay the damn thing and let it sit for awhile, then close the fucking account. Plus the fuckers have been upping my rates so it’s not almost 20%, even though I’ve always paid on time. Jackasses. Also today before I could talk to support they tried to sell me insurance, I told them I didn’t want it, he told me I could cancel it, I said I don’t want it, he said I could cancel it, I had to tell him a number of times not to send me the shit.
So fuck you Citi, I don’t want your shit card any more.
I am a finance manager for the largest credit card issuer in the United States. We do not use the term “deadbeat” to describe individuals who pay their balance in full. Quite the contrary.
There are three basic card economics models. How issuers make money is usually some combination of the three.
Many banks with a par lending portfolio build AR*. They build their accounts receivable by lending you money at a rate higher than their funding costs.
Banks with subpar portfolios use a fee-based model. If you are in dire straits and ask for your credit limit to be raised, instead they will mail you another card. When both are maxed out and the cardholder cannot pay, the issuer collects twice the fees. This is neither a savory nor sustainable model.
Issuers with superpar portfolios use a spend-based model. Their cardholders are more affluent than the norm, and as such spend more money at merchants. These issuers use their marketing power to drive their cardmembers to merchants who accept their card, and thus they charge a higher premium for card acceptance. These issuers primarily offer charge products rather than lending products, and as such they make money whether the cardholders revolve or not. They command an annual fee for these charge products, which composes a substantial piece of their revenue.
I was barraged by applications for a Chase Visa card. Twice a week I had an offer in my mailbox and I finally took them up on the offer. (At 0% APR on purchases and balance transfers until Apr '08, how could I not?) Well, I got the card in the mail today and called to activate it. At first, it was all automated and easy, then I had to talk to the CSR in most likely India. She asked me a bunch of questions that I responded using the most arcane colloquialisms I could think of at the time.
CRS: Did you register for a PIN for cash advances?
Me: You betcha.
CSR: I’m sorry?
Me: Yuppers.
CSR: Uhhhh…now, if you ever need to take a month off of billing, we allow one grace period a year where you can forgo a payment with absolutely no penalty.
Me: Yowza! That’s splendiferous!
CSR: Umm, I’m sorry?..
I was getting offers for low interest rates on other cards so I called my Sears card cs and asked for a lower interest rate. I’ve had this card for over 10 years. They said no but gave me an address to write to. I wrote a letter explaining that I wanted to continue to do business with them if they would give me a more competitive rate. They wrote back a bug no so now I’ve transferred to a new card and planned on cancelling my account.
It seems strange to me that cancelling a card should hurt your credit rating. It seems that having too much open credit would be worse. Does anyone know why? How about the manager who posted?
A couple of years ago I got a cash advance on another card in a minor emergency. Being the careless schmuck I sometimes am it took me over a year to notice how high the interest rate was for the cash advance. I called and asked if I could pay the minimum payment and add an extra payment toward the cash advance.
Nope. I was informed the cash advance with the outrageous interest rate was the very last thing that would be paid. Even behind the more recent purchases. The only way to pay it was to pay the entire balance. If you can’t do that you’re just stuck with the high interest rate until you do. I wrote them a letter as well objecting to this policy. It sends the message don’t charge anything until you pay off the cash advance {which isn’t awful but not very customer friendly} and to me it makes me not want the freakin card at all.
I’d be interested in knowing why canceling a card might hurt your credit rating. It really doesn’t make sense to me. Regardless, I may still cancel those two cards. Their policies suck big time.
