Revolvers and Hardcore Revolvers 12 November 2022 at 1:55AM in Credit cards 13 replies 735 views

Ebe_Scrooge

MalMonroe said:

The problem is that persistently having outstanding balances, of any kind, on your credit report will affect how lenders see you. If they see that balances are not being cleared, they will be unlikely to lend to that person. Whether that person pays the minimum or whatever. A balance remaining on anything on anyone's credit report is a no-no. Because it indicates that you do not have the required finances to clear your debts. 

That's the message that took absolutely aeons to be absorbed by my brain! (Duh) I used to listen to Martin Lewis saying 'clear the balance, IN FULL! every month' but never did it because although I really wanted to, I couldn't afford to. Now the penny has well and truly dropped, I've got my budgeting under control and can manage my finances better, I get it. And I'm now in that gang. But it took some time! And I received some of those 'persistent debt' letters in the past, too. Shoved them in the nearest available drawer. Not the way to deal with things!

If you clear all your balances every month, you're more likely to be looked on more favourably by any lender.

And of course, as everyone knows, credit scores/ratings mean nothing at all since no-one but you can see them.

This is my own opinion, based on my own experiences with credit cards, loans and lenders. 

You are absolutely correct.  Yes, of course, credit card companies make money from you if you are paying interest.  But they also have the expense of sending out the "persistent debt" letters that they are required to send.  And the hassle of chasing you if you default.  And the chance of losing money if you simply stop paying.  All this is very expensive for them.

Someone who uses their cards regularly, pulls in some lovely merchant fees every month for them, always pays on time, probably never has any problem in repaying in full every month, someone who is sensible in using credit within their means ... it's a nice little earner for them, with no hassle or expense.

For the consumer, it's also a no-brainer - build up a nice credit history at zero expense, and if you can earn a few "points" (airmiles, cashback, Nectar Points, whatever they may be) along the way, then it's a Brucie-Bonus.

redux

WillPS said:

Deleted_User said:

grumbler said:

JamesPeter said:

grumbler said:

alfred64 said:

Both of these types will damage your credit rating even if never missing a monthly payment or paying late.

And it surprises me that more than 50% pay balances in full (I'm one of them, but thought it was a minority).

That's Experian's view, and they aren't a lender.

I think real lenders much prefer customers that don't pay their balances in full. Otherwise why would they have all these balance transfer, money transfer and 0% purchases offers? The only reason is that they hope that you'll start paying interest when the offer ends.

Credit card firms make a great deal of money (typically 30-40% of their income) from merchant fees, contrary to popular myth, people who pay off in full every month are actually VERY attractive to lenders, hence prime cards like cashback are typically issued to those with good credit history. Further, almost no risk of default and having to chase payments, low risk of things like debt write off, persistent debt costs to the lender etc. BT and MT offers get them a fee for the most part. It is a rare customer who could balance a cashback credit card with only using 0% fee BT cards and only making money for the bank by sales

This is absolute nonsense.

The interchange fee is capped at 0.3% - for clarity, this is the fee which Mastercard and Visa can take for each transaction. The card issuer then receives a cut of that 0.3%. For a card which issues 0.25%+ cashback, you can safely presume they are making no money at all on interchange. (The only exception to this is Amex cards with no cobrand.) I put it to you that this 40% figure is entirely plucked from thin air, and challenge you to substantiate it if not.

Ignoring the interchange fee cap, what you're saying makes no sense. For starters, balance/money transfer products will gain zero interchange revenue unless the cards are used in a way which the terms typically disincentivise (i.e. mixing 'active' and 'long term' balances). If interchange was such a vital revenue source, do you not think card issuers would universally ensure that spending since the previous statement was prioritised ahead of promotional balances when payments are considered?

Finally - your implication that balance transfer lenders are creaming it by virtue of their transfer fee is severely outmoded by events. The longest 0% transfer card available is the Sainsburys product at max 34 months and max 3.88% fee. That wont even cover a third of the BoE base rate over that period when all is said and done.

A remark that firms make 40% of their income from merchant fees isn't the same as saying these constitute 40% of the funds travelling through accounts.

In a way it's like client funds, as are all the account balances of all types of bank accounts; including loans and credit cards; they don't belong to the bank, and don't appear as money earned by the bank.

The fees the bank earns will be a tiny fraction of that, and that turnover is what is analysed as the performance of the business. So it's entirely possible that what Farfetch said may be true.

[Deleted User]

I don't know why WillPS bothers to reply to me, I already advised I have them on ignore because of previous forum behaviour (unnecessary arguments, continuing with arguments where they have been shown wrong, just to "win")

The merchant and interchange fees make up a substantial amount of their income - see here - Amex for example made $4bn from interchange income vs $8.6bn from interest

Also it's factually wrong they are capped at 0.3%, in fact one of the many "brexit bonuses" was the fact they were no longer subject to the EU cap rules and in fact the cap is actually 1.5% for credit cards / 1.15% debit cards