JaJa credit card unexplained closure of account 3 March at 9:58AM in Credit cards 142 replies 40.9K views

WillPS

CliveOfIndia said:

WillPS said:

LunaLater said:

WillPS said:

LunaLater said:

WillPS said:

LunaLater said:

WillPS said:

CliveOfIndia said:

kipsterno1 said:

I haven't paid a penny in interest which might be why they nolonger want me as a customer. 

This in itself would not usually be a trigger for account closure.  Whilst interest paid by a customer is of course welcome for a lender, credit card issuers receive plenty of income from the fees they charge the retailer every time you use the card.  If you use the card regularly and always pay in full every month, they get a nice steady income stream with none of the costs associated with having to chase (potentially) bad debt.

No, they don't. Mastercard/Visa issuers don't charge the merchant a penny, ever.

Mastercard/Visa charge what is known as 'interchange'. For UK credit cards this is capped at 0.3% (when used within the UK).

They may pay some of this to the issuer by way of commission, but even if they didn't keep any and passed the whole lot on 0.3% is not a plentiful source of revenue.

To put it in to perspective, the cost of getting a physical credit card to the customer is something like £5. Even if the issuer got 100% of that interchange revenue (which they never would, as then Visa/Mastercard would earn zero), it would take £1666.67 worth of spend just to cover that one simple cost.

That doesn’t seem to be correct.

https://startups.co.uk/payment-processing/credit-card-processing-fees/

Those charges are between the merchant and their acquiring bank. They will include interchange (@ 0.3% for all consumer Visa and Mastercard credit cards), but none of the rest of it will be passed to Visa or Mastercard (and thus the issuer).

It’s really not clear which point you are trying to make here, the queasy ion was about the issuer, who do charge fees, not about Mastercard themselves.

I was replying to @CliveOfIndia who was asserting the oft-repeated myth that card issuers make a healthy return from low-normal spending when paid in full (so no interest) because of the fees merchants pay.

It's a common misunderstanding that fees merchants pay are passed on to the card issuers, when actually none of it does directly, and the total slice which could even potentially get to them is the interchange fee which is capped at 0.3% (which is the total revenue for both Visa/Mastercard AND the issuer). 

I didn't say the merchants don't pay fees, as that'd be plainly untrue.

It’s not a myth, and you are wrong. You are getting confused between the issuer and Mastercard. Mastercard are not thé issuer, so why do you keep mentioning them?

Who is it that you think that the 1-3% fees are going to if not the issuer?

Why do you think they are?

I am telling you that in a standard transaction (i.e. not an incentivised retailer commission/cashback scenario) the only revenue that the issuer gets is derived from the Interchange Fee.

There is no neccessary relationship between acquiring banks and card issuers - this is the 'value' which Visa/Mastercard provide. That being the case, why and how would the acquiring bank be paying the issuer directly?

Prove me wrong.

https://www.fool.co.uk/2019/03/28/how-do-banks-make-money-from-credit-cards/

"Credit card issuers also generate income from charging merchant fees. They are generated when a retailer accepts a credit card payment, with the retailer paying a percentage of the value of the sale to the credit card issuer. This is generally around 1.75% and is called an interchange rate."

"The credit card network also charges retailers a fee per transaction. Networks include Visa and Mastercard, for example, with them charging around 0.12% per transaction."

"Credit cards are a lucrative product for banks and other issuers"

So every time you buy something on your credit card, the issuing bank (Santander, HSBC, RBS, whoever) gets paid a percentage of the transaction value by the retailer.  The network (Visa, Mastercard etc.) also get paid a fee.

This is why very often, for instance, a car dealer will refuse to accept a credit card for anything other than a small deposit.  1.75% (or whatever the fee is for that particular retailer) of £500 isn't too bad, and the dealer is prepared to absorb that.  But 1.75% of £50,000 is a sizeable chunk of cash.

The article is correct except that it doesn't take account of the Interchange Fee Cap:

https://www.psr.org.uk/news-and-updates/latest-news/news/psr-sets-out-how-it-will-regulate-the-new-eu-interchange-fee-regulation-in-the-uk/

I suspect it was either originally written before this was implemented or was designed for an American audience.

When you use a UK issued Visa or Mastercard to at a UK merchant, the merchant's acquiring bank will receive no less than 99.7% of the total amount from Visa/Mastercard for that transaction (99.8% if it was a debit card). Whatever the acquiring bank eventually pays the merchant is not regulated and is entirely between those two parties, and will factor in both the liability the acquiring bank has to take (Visa/Mastercard take none at all) and also their own profit margin.

That interchange fee is the entirety of the revenue for both the issuer AND Visa/Mastercard. I suspect the amount Visa/Mastercard retain in fee-capped scenarios is less than 0.12%, but even if it's nothing (and it definitely is more than that!) even the full 0.3% would not be a plentiful revenue stream.

Once again I am not disputing that merchants pay more than 0.3%.

CliveOfIndia

WillPS said:

CliveOfIndia said:

WillPS said:

LunaLater said:

WillPS said:

LunaLater said:

WillPS said:

LunaLater said:

WillPS said:

CliveOfIndia said:

kipsterno1 said:

I haven't paid a penny in interest which might be why they nolonger want me as a customer. 

This in itself would not usually be a trigger for account closure.  Whilst interest paid by a customer is of course welcome for a lender, credit card issuers receive plenty of income from the fees they charge the retailer every time you use the card.  If you use the card regularly and always pay in full every month, they get a nice steady income stream with none of the costs associated with having to chase (potentially) bad debt.

No, they don't. Mastercard/Visa issuers don't charge the merchant a penny, ever.

Mastercard/Visa charge what is known as 'interchange'. For UK credit cards this is capped at 0.3% (when used within the UK).

They may pay some of this to the issuer by way of commission, but even if they didn't keep any and passed the whole lot on 0.3% is not a plentiful source of revenue.

To put it in to perspective, the cost of getting a physical credit card to the customer is something like £5. Even if the issuer got 100% of that interchange revenue (which they never would, as then Visa/Mastercard would earn zero), it would take £1666.67 worth of spend just to cover that one simple cost.

That doesn’t seem to be correct.

https://startups.co.uk/payment-processing/credit-card-processing-fees/

Those charges are between the merchant and their acquiring bank. They will include interchange (@ 0.3% for all consumer Visa and Mastercard credit cards), but none of the rest of it will be passed to Visa or Mastercard (and thus the issuer).

It’s really not clear which point you are trying to make here, the queasy ion was about the issuer, who do charge fees, not about Mastercard themselves.

I was replying to @CliveOfIndia who was asserting the oft-repeated myth that card issuers make a healthy return from low-normal spending when paid in full (so no interest) because of the fees merchants pay.

It's a common misunderstanding that fees merchants pay are passed on to the card issuers, when actually none of it does directly, and the total slice which could even potentially get to them is the interchange fee which is capped at 0.3% (which is the total revenue for both Visa/Mastercard AND the issuer). 

I didn't say the merchants don't pay fees, as that'd be plainly untrue.

It’s not a myth, and you are wrong. You are getting confused between the issuer and Mastercard. Mastercard are not thé issuer, so why do you keep mentioning them?

Who is it that you think that the 1-3% fees are going to if not the issuer?

Why do you think they are?

I am telling you that in a standard transaction (i.e. not an incentivised retailer commission/cashback scenario) the only revenue that the issuer gets is derived from the Interchange Fee.

There is no neccessary relationship between acquiring banks and card issuers - this is the 'value' which Visa/Mastercard provide. That being the case, why and how would the acquiring bank be paying the issuer directly?

Prove me wrong.

https://www.fool.co.uk/2019/03/28/how-do-banks-make-money-from-credit-cards/

"Credit card issuers also generate income from charging merchant fees. They are generated when a retailer accepts a credit card payment, with the retailer paying a percentage of the value of the sale to the credit card issuer. This is generally around 1.75% and is called an interchange rate."

"The credit card network also charges retailers a fee per transaction. Networks include Visa and Mastercard, for example, with them charging around 0.12% per transaction."

"Credit cards are a lucrative product for banks and other issuers"

So every time you buy something on your credit card, the issuing bank (Santander, HSBC, RBS, whoever) gets paid a percentage of the transaction value by the retailer.  The network (Visa, Mastercard etc.) also get paid a fee.

This is why very often, for instance, a car dealer will refuse to accept a credit card for anything other than a small deposit.  1.75% (or whatever the fee is for that particular retailer) of £500 isn't too bad, and the dealer is prepared to absorb that.  But 1.75% of £50,000 is a sizeable chunk of cash.

That interchange fee is the entirety of the revenue for both the issuer AND Visa/Mastercard. I suspect the amount Visa/Mastercard retain in fee-capped scenarios is less than 0.12%, but even if it's nothing (and it definitely is more than that!) even the full 0.3% would not be a plentiful revenue stream.

OK, well I guess that in that case, all of the banks with their millions of credit card customers must be making a big loss out of the majority of customers who use their card properly and never pay any fees or interest.  There's a fair cost to the bank to provide, run and administer a line of credit, probably far more than what they're making from "sensible" card-using customers.  Makes one wonder why they bother, really; I'd have thought they'd just close all the accounts of customers who've had a card for more than a year and never paid any fees or interest.

WillPS

CliveOfIndia said:

WillPS said:

CliveOfIndia said:

WillPS said:

LunaLater said:

WillPS said:

LunaLater said:

WillPS said:

LunaLater said:

WillPS said:

CliveOfIndia said:

kipsterno1 said:

I haven't paid a penny in interest which might be why they nolonger want me as a customer. 

This in itself would not usually be a trigger for account closure.  Whilst interest paid by a customer is of course welcome for a lender, credit card issuers receive plenty of income from the fees they charge the retailer every time you use the card.  If you use the card regularly and always pay in full every month, they get a nice steady income stream with none of the costs associated with having to chase (potentially) bad debt.

No, they don't. Mastercard/Visa issuers don't charge the merchant a penny, ever.

Mastercard/Visa charge what is known as 'interchange'. For UK credit cards this is capped at 0.3% (when used within the UK).

They may pay some of this to the issuer by way of commission, but even if they didn't keep any and passed the whole lot on 0.3% is not a plentiful source of revenue.

To put it in to perspective, the cost of getting a physical credit card to the customer is something like £5. Even if the issuer got 100% of that interchange revenue (which they never would, as then Visa/Mastercard would earn zero), it would take £1666.67 worth of spend just to cover that one simple cost.

That doesn’t seem to be correct.

https://startups.co.uk/payment-processing/credit-card-processing-fees/

Those charges are between the merchant and their acquiring bank. They will include interchange (@ 0.3% for all consumer Visa and Mastercard credit cards), but none of the rest of it will be passed to Visa or Mastercard (and thus the issuer).

It’s really not clear which point you are trying to make here, the queasy ion was about the issuer, who do charge fees, not about Mastercard themselves.

I was replying to @CliveOfIndia who was asserting the oft-repeated myth that card issuers make a healthy return from low-normal spending when paid in full (so no interest) because of the fees merchants pay.

It's a common misunderstanding that fees merchants pay are passed on to the card issuers, when actually none of it does directly, and the total slice which could even potentially get to them is the interchange fee which is capped at 0.3% (which is the total revenue for both Visa/Mastercard AND the issuer). 

I didn't say the merchants don't pay fees, as that'd be plainly untrue.

It’s not a myth, and you are wrong. You are getting confused between the issuer and Mastercard. Mastercard are not thé issuer, so why do you keep mentioning them?

Who is it that you think that the 1-3% fees are going to if not the issuer?

Why do you think they are?

I am telling you that in a standard transaction (i.e. not an incentivised retailer commission/cashback scenario) the only revenue that the issuer gets is derived from the Interchange Fee.

There is no neccessary relationship between acquiring banks and card issuers - this is the 'value' which Visa/Mastercard provide. That being the case, why and how would the acquiring bank be paying the issuer directly?

Prove me wrong.

https://www.fool.co.uk/2019/03/28/how-do-banks-make-money-from-credit-cards/

"Credit card issuers also generate income from charging merchant fees. They are generated when a retailer accepts a credit card payment, with the retailer paying a percentage of the value of the sale to the credit card issuer. This is generally around 1.75% and is called an interchange rate."

"The credit card network also charges retailers a fee per transaction. Networks include Visa and Mastercard, for example, with them charging around 0.12% per transaction."

"Credit cards are a lucrative product for banks and other issuers"

So every time you buy something on your credit card, the issuing bank (Santander, HSBC, RBS, whoever) gets paid a percentage of the transaction value by the retailer.  The network (Visa, Mastercard etc.) also get paid a fee.

This is why very often, for instance, a car dealer will refuse to accept a credit card for anything other than a small deposit.  1.75% (or whatever the fee is for that particular retailer) of £500 isn't too bad, and the dealer is prepared to absorb that.  But 1.75% of £50,000 is a sizeable chunk of cash.

That interchange fee is the entirety of the revenue for both the issuer AND Visa/Mastercard. I suspect the amount Visa/Mastercard retain in fee-capped scenarios is less than 0.12%, but even if it's nothing (and it definitely is more than that!) even the full 0.3% would not be a plentiful revenue stream.

OK, well I guess that in that case, all of the banks with their millions of credit card customers must be making a big loss out of the majority of customers who use their card properly and never pay any fees or interest.  There's a fair cost to the bank to provide, run and administer a line of credit, probably far more than what they're making from "sensible" card-using customers.  Makes one wonder why they bother, really; I'd have thought they'd just close all the accounts of customers who've had a card for more than a year and never paid any fees or interest.

Do we know that a majority of cards are used in that way?

The reason that we don't see more active pruning is severalfold - but many of them are tantamount to the same thing, which is that closing customer accounts enmasse is a bad look. In the case of a retail bank you'd be closing the door on a relationship and any profit potential it might have in future. In an affinity (or supermarket bank) arrangement you'd be upseting exactly the customers who were supposed to be incentivised for loyalty.

To bring it back to this thread, the 'low hanging fruit' of pruning is the 'pure lenders' like Jaja, who won't care if the customer has a negative impression of them if they're unlikely to ever make them any money in any way. The same is true of Creation and NewDay who have both cast off huge parts of their book in recent years too.

GRMan

Happened to my wife but not me.  Difference is she hardly ever used her card whilst I use mine every month or two.  I conclude it is because of low usage.

Anthonyuk_2

I just had the email. Former Post office user. And used my card all the time. Very often just up to the limit, but I always paid off my account in full each month so they had no money coming from interest.

I had been pestering for the last 6 months for them to up my credit limit and they always refused. 

I need to find a replacement travel card now. Barclays travel card is only for 3 years then the offer ends, so I have their card but not any benefit from it. And I won't go back to Halifax after a bad experience with them.

giljc

Service has always been rubbish so no great loss. Plenty of other better cards

philjnall

Is there anybody out there who hasn't received a message from Jaja advising forthcoming cancellation of their credit card?
Just wondered!

KittenChops

philjnall said:

Is there anybody out there who hasn't received a message from Jaja advising forthcoming cancellation of their credit card?
Just wondered!

Me!  Not yet anyway...

I'm an ex Post Office card holder - and the last few months have been using this card a lot, but paying off in full each month to avoid interest.

lr1277

So far I have not received the message.

Another ex post office card holder.

I use the card 13-16 times a year for foreign transactions. That's it.

I pay off in full by direct debit.

surreysaver

philjnall said:

Is there anybody out there who hasn't received a message from Jaja advising forthcoming cancellation of their credit card?
Just wondered!

I haven't. I'm ex Post Office. Just spent £4 or £5 per month to qualify for my RBS rewards