Re: Declined but excellent credit? Unsure Thread

[Deleted User]

RichyRich wrote: »

That's got to be a secondary source of income after interest though; I'm not au fait with the figures, but for arguments sake let's say a business pays 5% of the transaction value when paid by credit card. That commission needs to effectively be divided up three ways - the acquiring bank, VISA/MC/AmEx, and the paying bank. In some cases, the paying bank split their allocation of the commission with the cardholder.

I'd suggest that the lion's share of the commission would be paid to the facilitating organisation, i.e. VISA/MasterCard/AmEx. So for the sake of argument let's assume they get 3% of the transaction value, which leaves 2% to be divided between the paying bank and the acquiring bank. Exact splits will, of course, vary as they will be individually negotiated, but even if we work on the assumption that they split it down the middle, the paying bank gets 1% of the transaction value.

This means that the cardholder needs to buy £30 worth of goods each month before the bank can even afford to send him or her a statement - probably more like £45 once you take into account the cost of paper, printing, and administration involved.

Compare this to interest rates of up to 49.9% APR and it's obvious where the credit card company's main income stream is!

Thanks for clearing this up on this board, perhaps it should be a FAQ Sticky?

See below thread which may lead onto another similar problem you may see more of in the comming months, if you remember Egg decided to close a fair few accounts earlier in the year.

http://forums.moneysavingexpert.com/showthread.html?p=16643567&posted=1#post16643567

hasdogs

RichyRich wrote: »

That's got to be a secondary source of income after interest though;

I read around 60% of UK credit card holders pay no interest charges. I don't and the card I use most will be paying me about 170 quid in cashback next month. If they can afford to pay low risk customers 1% there is plenty of money to be made without interest charges.

Sure there is more money to be made from interest but it is high risk, there is also money to be lost.

I would think customers with excellent credit ratings are welcome provided it looks like they will use the card a lot which might be the OPs problem.