I wonder... does my credit card bank hate me?

stehouk

How do they make money on a 0% balance transfer card, i transfered 9k to a 0% card and i have never spent on it since and only pay the minimum payment and i will either pay it off when it ends or i will balance transfer it again, there are probably thousands of customers doing this, does anyone know where the funds come from to pay for this and how can they make money on this ?
or is this just a loss leader.

Nebulous2

stehouk wrote: »

How do they make money on a 0% balance transfer card, i transfered 9k to a 0% card and i have never spent on it since and only pay the minimum payment and i will either pay it off when it ends or i will balance transfer it again, there are probably thousands of customers doing this, does anyone know where the funds come from to pay for this and how can they make money on this ?
or is this just a loss leader.

For most BT cards there is a fee, which helps to offset the cost, however many people don't pay it off after the 0% period ends. I've seen someone claim only 27% of people BT at the end of the promotional rate.

Then there are people who can't BT for a variety of reasons; deals become more difficult to get, people have other commitments or changes in their employment which means deals become harder to qualify for.

In other words it is a lure, which sucks enough people into paying interest to be worth doing.

Ergates

stehouk wrote: »

How do they make money on a 0% balance transfer card, i transfered 9k to a 0% card and i have never spent on it since and only pay the minimum payment and i will either pay it off when it ends or i will balance transfer it again, there are probably thousands of customers doing this, does anyone know where the funds come from to pay for this and how can they make money on this ?
or is this just a loss leader.

• Transfer fees
• People not clearing their balance before the end of the period and thus paying interest
• People keeping the card and using thus generating transaction fees.

Oasis1

Very interesting and useful discussion - thanks all! Minus the captain obvious post from Nebulous2 - hope you got a little seratonin boost from those 5 thanks :T

ICan'tStandIt

stehouk wrote: »

How do they make money on a 0% balance transfer card, i transfered 9k to a 0% card and i have never spent on it since and only pay the minimum payment and i will either pay it off when it ends or i will balance transfer it again, there are probably thousands of customers doing this, does anyone know where the funds come from to pay for this and how can they make money on this ?
or is this just a loss leader.

Not everyone can transfer when the promotional rate ends and cannot afford to clear the balance beforehand either.

Not sure on percentages, but there are probably a pretty big number of accounts that have interest that starts to pile on.

As for the original question about whether or now people who don't let their balances revolve and whether or not they make Amex and other card issuers money, the merchant fees bring in revenue and Amex fees tend to be higher anyway.

It's also seen that Amex card holders spend more and accepting the card is therefore attracting higher spending customers. More revenue for the retailers and therefore more income for the company.

Amex themselves don't hate customers, they are a obviously needed, however, their staff probably hate some of the more irritating and demanding customers.

System

Ergates wrote: »

Is "I bring value to a credit card company" really a "very high opinion" of oneself?

The margins on non-revolvers aren't actually that high (even taking into account interchange income) with issuance, chargeback / S75 and fraud.

It's fairly easy to see that the cards covered by the cap but with rewards much greater will be easily operating at a loss.

I'm not sure why such a cardholder would 'bring value' to Amex?!

Nick_C

Heng_Leng wrote: »

The margins on non-revolvers aren't actually that high (even taking into account interchange income) with issuance, chargeback / S75 and fraud.

It's fairly easy to see that the cards covered by the cap but with rewards much greater will be easily operating at a loss.

I'm not sure why such a cardholder would 'bring value' to Amex?!

As I explained above;

Amex can have 3 million customers and lose money on some of them, or they can have 300,000 customers and make money on all of them.

But which is the better model when Amex are trying to sign up new retailers to accept Amex as a payment method?

You may not understand the concept, but Amex clearly do.

Ergates

Heng_Leng wrote: »

The margins on non-revolvers aren't actually that high (even taking into account interchange income) with issuance, chargeback / S75 and fraud.

It's fairly easy to see that the cards covered by the cap but with rewards much greater will be easily operating at a loss.

I'm not sure why such a cardholder would 'bring value' to Amex?!

Firstly: Each individual customer might not bring in much profit, but a small profit multiplied many times makes a large profit.

Secondly, and most importantly: I was questioning your categorization of "I still bring value to Amex …" as having "...a very high opinion of yourself."
Somene saying "I'm an excellent dancer", "I'm very beautiful", "I make the best chocolate cakes in the world", might be described as having a high opinion of themselves. Applying the same description to someone who merely believes their credit card provider makes a profit off them is more than a bit of a stretch!