Are you hot (financially)?

jamesd

EssexHebridean wrote: »

You've not read the article, have you?

Of course I read it, and the click bait title that led to it. That's why I'm responding to the title and to what being "hot (financially)" really is - not the highest credit score achievable but the one that is maximising your benefit from your credit record. Being hot financially is more interesting than yet another promotion of this way for MSE to make money.

EssexHebridean wrote: »

I suspect this thread was posted to provoke discussion on/raise awareness of the article which MSE Faye has linked to

Partly. MSE selects its content to advertise in this way based in part on how much money MSE will make from people who follow the advertorial. In this case that would be referral fees for credit cards and loans.

EssexHebridean wrote: »

If people have not yet signed up to the credit club it is well worth doing so as an easy way to get a "snapshot" of how they appear to financial institutions.

It's useful but those who have a lot of non-work income are likely to get unrepresentative answers because of how that is treated there rather than in a real application. Real applications typically don't distinguish between work and non-work income, though some do specify.

jamesd

Anthorn wrote: »

Lastly the artice fails to elaborate on why we need to pay off the full balance on credit cards every month.

We don't and since most cards in the UK with a balance have the balance on special offer terms it would be counter-productive to pay off the full balance.

Similarly MSE will usually say don't spend on a balance transfer card when spending on a balance transfer card with a balance is actually a good thing to do. You'll pay some interest but if you spend enough so that the minimum payment doesn't reduce the balance you'll keep the maximum possible amount of money at the promotional rate. The time to stop this level of spending is when the interest cost exceeds the cost of competing balance transfer deals.

Anthorn wrote: »

all paying off the full balance every month does is to tell lenders that we are avoiding interest and they are not going to make even a penny in profit if they give us a card.

There are at least four different ways that card issuers make money from cards, so a customer paying no interest can still be profitable:

1. interest.
2. transaction charges, paid by merchants. just use the card and the issuer makes money from these.
3. partnership deals with other firms, like discount vouchers.
4. promotion of other financial services like credit insurance.

Many of the MSE pieces are geared to those who don't have much knowledge of a subject and who are having trouble and this is one of those.

sourcrates

Pincher wrote: »

You need to keep a repayment history active, so they have some credit history to look at when you want a mortgage.

It costs nothing to do your grocery and fuel by card.
And you can get some cashback on top.

Play the game, pretend to be a law abiding citizen by day.
Plot to overthrow western civilisation by night.

When I am emperor, who dares to credit score me? :cool:

I don't need a credit history, I am already emperor !!

Homeowner outright, don't use credit.

Like your style though !!

Anthorn

jamesd wrote: »

We don't and since most cards in the UK with a balance have the balance on special offer terms it would be counter-productive to pay off the full balance.

Similarly MSE will usually say don't spend on a balance transfer card when spending on a balance transfer card with a balance is actually a good thing to do. You'll pay some interest but if you spend enough so that the minimum payment doesn't reduce the balance you'll keep the maximum possible amount of money at the promotional rate. The time to stop this level of spending is when the interest cost exceeds the cost of competing balance transfer deals.

There are at least four different ways that card issuers make money from cards, so a customer paying no interest can still be profitable:

1. interest.
2. transaction charges, paid by merchants. just use the card and the issuer makes money from these.
3. partnership deals with other firms, like discount vouchers.
4. promotion of other financial services like credit insurance.

Many of the MSE pieces are geared to those who don't have much knowledge of a subject and who are having trouble and this is one of those.

Are you referring to the same article? Have you actually read the article linked in the opening post?

My whole point was that the article doesn't provide further information and therefore the article is pedantic: To build or rebuild a credit history we need to pay off the whole balance every month? That's what the article says.

While CC lenders may make a very small amount from transaction charges &c which will be eaten by running costs, their main source of profit is interest.

jamesd

Anthorn wrote: »

Are you referring to the same article? Have you actually read the article linked in the opening post?

I was replying to the things you wrote in your post and of course I've read the article.

Anthorn wrote: »

My whole point was that the article doesn't provide further information and therefore the article is pedantic: To build or rebuild a credit history we need to pay off the whole balance every month? That's what the article says.

Since that is not all that the article says about how to build or rebuild a credit history you might want to read it again. Three of the other things mentioned are reducing balances, breaking inappropriate links to others and getting on the electoral roll.

Anthorn wrote: »

While CC lenders may make a very small amount from transaction charges &c which will be eaten by running costs, their main source of profit is interest.

Transaction fees are not a very small amount for card issuers. They can easily be more than half of the total revenue that the card issuer receives, particularly for high end cards. The split between the various revenue sources depends on the cards, with high interest rate cards to credit-impaired consumers being the ones that have the highest interest portion to their revenue. The range of values described here may be useful, though it's mainly about US card issuers, in a market that has traditionally had lower transaction charges than the UK.

Anthorn

jamesd wrote: »

I was replying to the things you wrote in your post and of course I've read the article.

Since that is not all that the article says about how to build or rebuild a credit history you might want to read it again. Three of the other things mentioned are reducing balances, breaking inappropriate links to others and getting on the electoral roll.

Transaction fees are not a very small amount for card issuers. They can easily be more than half of the total revenue that the card issuer receives, particularly for high end cards. The split between the various revenue sources depends on the cards, with high interest rate cards to credit-impaired consumers being the ones that have the highest interest portion to their revenue. The range of values described here may be useful, though it's mainly about US card issuers, in a market that has traditionally had lower transaction charges than the UK.

As I thought, you haven't read the article and I'm not the first poster in this thread to say that or you have not understood what you have read. In any case you're supposed to be discussing the article linked in the OP. That's what this thread is all about.

Lastly, you make a rather sweeping statement without any evidence whatsoever:

Transaction fees are not a very small amount for card issuers. They can easily be more than half of the total revenue that the card issuer receives, particularly for high end cards. The split between the various revenue sources depends on the cards

Oh so the payment processors i.e. Mastercard, VISA don't charge anything at all then? In addition one wonders why CC lenders charge interest at all when they make all their profit from transaction charges ROFL.

It's a simple matter of plain old common sense: CC lenders make a profit from interest and if borrowers pay off their balances every month as the article does in fact say and don't pay interest, CC lenders are not going to make that profit!

Bye-bye debate over.

jamesd

As I have indicated I read it and not only read it but gave three examples where you had failed to read things it contained. I also linked to one of many sources for the revenue source for card issuers, after the cut taken by the payments processors.

You are, however, wise to discontinue making false claims that can be so trivially countered.

Anthorn

jamesd wrote: »

As I have indicated I read it and not only read it but gave three examples where you had failed to read things it contained. I also linked to one of many sources for the revenue source for card issuers, after the cut taken by the payments processors.

You are, however, wise to discontinue making false claims that can be so trivially countered.

The link you posted is not pertaining to the U.K. My previous posts are pertaining to the article, your posts are pertaining to my posts.

Your arguments have in fact persisted on MSE for years and that's not really surpising because MSE is a money saving forum. But those arguments are themselves falsehoods. But those such as yourself cannot grasp that:

(1) To build a good credit history pay off the full balance of the CC every month. Lenders really do want us to do that and doing that increases our chances of getting other cards and more credit.

(2) Lenders make enough profit from card transactions and really don't need to make a profit from interest charged on balances.

I disagree with both of the above and I think most people will be able to see the above arguments as ridiculous.

OK bye-bye

takman

Anthorn wrote: »

The link you posted is not pertaining to the U.K. My previous posts are pertaining to the article, your posts are pertaining to my posts.

Your arguments have in fact persisted on MSE for years and that's not really surpising because MSE is a money saving forum. But those arguments are themselves falsehoods. But those such as yourself cannot grasp that:

(1) To build a good credit history pay off the full balance of the CC every month. Lenders really do want us to do that and doing that increases our chances of getting other cards and more credit.

(2) Lenders make enough profit from card transactions and really don't need to make a profit from interest charged on balances.

I disagree with both of the above and I think most people will be able to see the above arguments as ridiculous.

OK bye-bye

Paying off your card in full every month is attractive to lenders and it does make you more likely to get future credit. I always pay my card in full every single month and my Halifax Clarity card has one of the highest credit limits I have seen at the lowest interest rate they offer.

redux

jamesd wrote: »

Similarly MSE will usually say don't spend on a balance transfer card when spending on a balance transfer card with a balance is actually a good thing to do. You'll pay some interest but if you spend enough so that the minimum payment doesn't reduce the balance you'll keep the maximum possible amount of money at the promotional rate. The time to stop this level of spending is when the interest cost exceeds the cost of competing balance transfer deals.

I reached that conclusion myself, having recently done a balance transfer for the first time in several years, but it is a quite rare type of comment on here.

Especially with some of the longer periods like 40 months or so, some people who do no spending on the card may have paid off about half or even more of the starting balance by then, making choice of the longest term with highest fee a bit questionable, especially for low balances and relatively high fixed minimum payment.

But people will have differing motives. For the long term stoozers who could easily pay back anytime if a reason arose, keeping the maximum balance is desired, just for efficiency to reduce the turnover of deals necessary, but people who are using a zero offer to recover from gradually built up balances elsewhere probably aren't as confident and will be happy to see it going down.