Screw you Barclaycard

zagfles

WillPS said:

zagfles said:

WillPS said:

zagfles said:

WillPS said:

zagfles said:

paul_c123 said:

zagfles said:

paul_c123 said:

The best way to screw a credit card company IS to spend heavily on it and pay the balance in full by the due date. So, at least you have the warm reassurance that you've already been doing it for years. 

Start being a bit sloppy with paying in full, a bit of interest or fees here and there, etc and the offers will come flooding at you.

How do you think that "screws" them? Credit card companies still make loads of money through the fees they charge retailers so they're quite happy with full payers, that's why they offer the specific interest free exemption for paying in full. Plus even cashback with some cards. IIRC something like 60% of people pay in full every month.  

1) Because it costs them to provide the infrastructure/service/etc of providing a credit card.
2) Because they're offering a credit line for free

Sure, they make money through retailers fees etc but its a competitive, marginal, industry. They won't make any money from full-payers. Its all relative.

Of course they make money from full payers. Over half CC users are full payers, why would they want such customers if they didn't make money from them? And even give them cashback on top with some cards. If they didn't want them or weren't making money from them they'd simply charge interest from the purchase date to the payment date with no exemption for full payers. 

They like full payers, because they're a reliable rock solid income stream. Obviously they'd prefer it if you pay them interest as well, but they know that anyone who manages their finance properly is never going to pay interest at credit card rates. So if they did charge everyone interest from the purchase date, then full payers would close their cards and use debit cards instead.

But they want full payers, hence the specific interest exemption for them. 

As with any business they'll have loss leaders, for instance 0% offers, but they're always temporary time-limited offers which require action by the customer to avoid big fees/interest at the end. Paying a card in full every month requires zero action after setting up a DD to pay in full, and can last decades. They're not going to have ongoing permanent loss leaders for half their customer base. 

The interchange rate for UK personal credit cards used in the UK is capped at 0.3%. That's the total amount which goes to Visa or Mastercard, and they will likely pay some of that (but not all of it, otherwise they'd make nothing!) to your issuer in commission. Think about the costs of providing an account to you - as one example, it costs a fiver for them to issue a card and have it sent to you; assuming Barclaycard get all the interchange revenue (and they wont!) it'd take £1667 of UK spend to cover its cost. Every bit of paper you receive in the post will have cost them at least a quid now too. This is before you try and figure out the cost of providing a working service and fulfilling their obligations (incl S275).

The interchange fee is only a small part of the fee paid by merchants. See UK Card Processing Fees | Don't Get Ripped Off (merchantsavvy.co.uk) 

Irrelevant, as the only part which works its way back to the issuer is derived from the interchange fee. The rest is retained by the acquiring bank, and used to cover their costs and provide them with a profit margin.

And guess who one of the biggest acquiring banks is? 26 UK Payment Processing Companies & Merchant Accounts (2024) (merchantsavvy.co.uk)

I don't think they'll be bothered whether they make money through being the card issuer or providing merchant services. So while they may only get 0.3% directly as an issuer, they'll get somewhere between 0.95% and 2.75% as merchant acquirer. As an acquirer they of course get their fees whatever bank's card is used, but I suspect there's a reasonable balance between issuers and merchant acquirers and that the bigger acquirers offer the best long term deals on cards (such as the BC rewards card, cashback and no forex fees) to try to maintain that balance. 

Plus who takes the hit for stuff like S75 claims etc? From what it says in that link about BC being very fussy about who it provides merchant services to, I would think it's the acquiring bank which takes the hit where the merchant has gone bust etc. Also what about timing of payments? Does the issuing bank pay the acquiring bank straight away or is it all totted up a month or two later? So who is effectively paying for the interest free period? 

S75 is settled by the issuer, who will normally try to obtain whatever they can from chargeback - the acquiring bank will pass this straight on the merchant, and will take the hit if not. The remnants (consequential losses etc) will come out of the issuer's own pocket, and so must be considered part of the cost of doing business.

Barclaycard's acquiring bank services aren't relevant when calculating individual personal customer profitability, as it is money they'd be collecting/earning on any card spend. Indeed, Barclaycard could spin off or close down the consumer credit card division alltogether (not saying they will, but they could) and each side would have similar profitability to that it does today - see also RBS/WorldPay.

Barclaycard aren't putting credit cards out there to make money from their other division's merchant fees; it's two separate bites of a giant pie.

Why do you think they are then? I've got a legacy BC that pays 0.5% cashback, I've had it for well over a decade. I've never paid a penny in interest on it, have a DD to pay it in full every month. 

It's simply not credible that BC are making a loss from that sort of usage, in the hope that one day you'll slip up and pay interest. If they only wanted interest payers then they'd charge everyone interest. Or have an introductory interest free period followed by immediate interest on everything. They wouldn't offer full payers the specific interest free exemption for decades on end, on top of cashback. Loss leaders are always temporary time limited things. 

WillPS

zagfles said:

WillPS said:

zagfles said:

WillPS said:

zagfles said:

WillPS said:

zagfles said:

paul_c123 said:

zagfles said:

paul_c123 said:

The best way to screw a credit card company IS to spend heavily on it and pay the balance in full by the due date. So, at least you have the warm reassurance that you've already been doing it for years. 

Start being a bit sloppy with paying in full, a bit of interest or fees here and there, etc and the offers will come flooding at you.

How do you think that "screws" them? Credit card companies still make loads of money through the fees they charge retailers so they're quite happy with full payers, that's why they offer the specific interest free exemption for paying in full. Plus even cashback with some cards. IIRC something like 60% of people pay in full every month.  

1) Because it costs them to provide the infrastructure/service/etc of providing a credit card.
2) Because they're offering a credit line for free

Sure, they make money through retailers fees etc but its a competitive, marginal, industry. They won't make any money from full-payers. Its all relative.

Of course they make money from full payers. Over half CC users are full payers, why would they want such customers if they didn't make money from them? And even give them cashback on top with some cards. If they didn't want them or weren't making money from them they'd simply charge interest from the purchase date to the payment date with no exemption for full payers. 

They like full payers, because they're a reliable rock solid income stream. Obviously they'd prefer it if you pay them interest as well, but they know that anyone who manages their finance properly is never going to pay interest at credit card rates. So if they did charge everyone interest from the purchase date, then full payers would close their cards and use debit cards instead.

But they want full payers, hence the specific interest exemption for them. 

As with any business they'll have loss leaders, for instance 0% offers, but they're always temporary time-limited offers which require action by the customer to avoid big fees/interest at the end. Paying a card in full every month requires zero action after setting up a DD to pay in full, and can last decades. They're not going to have ongoing permanent loss leaders for half their customer base. 

The interchange rate for UK personal credit cards used in the UK is capped at 0.3%. That's the total amount which goes to Visa or Mastercard, and they will likely pay some of that (but not all of it, otherwise they'd make nothing!) to your issuer in commission. Think about the costs of providing an account to you - as one example, it costs a fiver for them to issue a card and have it sent to you; assuming Barclaycard get all the interchange revenue (and they wont!) it'd take £1667 of UK spend to cover its cost. Every bit of paper you receive in the post will have cost them at least a quid now too. This is before you try and figure out the cost of providing a working service and fulfilling their obligations (incl S275).

The interchange fee is only a small part of the fee paid by merchants. See UK Card Processing Fees | Don't Get Ripped Off (merchantsavvy.co.uk) 

Irrelevant, as the only part which works its way back to the issuer is derived from the interchange fee. The rest is retained by the acquiring bank, and used to cover their costs and provide them with a profit margin.

And guess who one of the biggest acquiring banks is? 26 UK Payment Processing Companies & Merchant Accounts (2024) (merchantsavvy.co.uk)

I don't think they'll be bothered whether they make money through being the card issuer or providing merchant services. So while they may only get 0.3% directly as an issuer, they'll get somewhere between 0.95% and 2.75% as merchant acquirer. As an acquirer they of course get their fees whatever bank's card is used, but I suspect there's a reasonable balance between issuers and merchant acquirers and that the bigger acquirers offer the best long term deals on cards (such as the BC rewards card, cashback and no forex fees) to try to maintain that balance. 

Plus who takes the hit for stuff like S75 claims etc? From what it says in that link about BC being very fussy about who it provides merchant services to, I would think it's the acquiring bank which takes the hit where the merchant has gone bust etc. Also what about timing of payments? Does the issuing bank pay the acquiring bank straight away or is it all totted up a month or two later? So who is effectively paying for the interest free period? 

S75 is settled by the issuer, who will normally try to obtain whatever they can from chargeback - the acquiring bank will pass this straight on the merchant, and will take the hit if not. The remnants (consequential losses etc) will come out of the issuer's own pocket, and so must be considered part of the cost of doing business.

Barclaycard's acquiring bank services aren't relevant when calculating individual personal customer profitability, as it is money they'd be collecting/earning on any card spend. Indeed, Barclaycard could spin off or close down the consumer credit card division alltogether (not saying they will, but they could) and each side would have similar profitability to that it does today - see also RBS/WorldPay.

Barclaycard aren't putting credit cards out there to make money from their other division's merchant fees; it's two separate bites of a giant pie.

Why do you think they are then? I've got a legacy BC that pays 0.5% cashback, I've had it for well over a decade. I've never paid a penny in interest on it, have a DD to pay it in full every month. 

It's simply not credible that BC are making a loss from that sort of usage, in the hope that one day you'll slip up and pay interest. If they only wanted interest payers then they'd charge everyone interest. Or have an introductory interest free period followed by immediate interest on everything. They wouldn't offer full payers the specific interest free exemption for decades on end, on top of cashback. Loss leaders are always temporary time limited things. 

Ah, so we're back to 'that can't be right'. It is, and the reason they are willing to pay for your business on an ongoing basis in the hope that you do something which makes you a profitable customer. Examples of which might include:

• paying interest
• using your card overseas (note overseas spend is also likely to reward the issuer with more interchange revenue too, hence why so many cards offer zero-FX now as every £ spent will earn far more than UK spend)
• payment of other fees
• using your card in such a way that the issuer earns them a commission, i.e. using the Avios card on BA.com or using the John Lewis NewDay card at Waitrose - or partaking in one of the 'on card cashback' offers they might offer
• using the relationship built with you to target you for other more profitable services, like loans, car finance, mortgages and savings
  

There's a reason Barclaycard don't offer a 0.5% cashback card any more, but do offer a 0.25% card with free FX  (0.25% is widely thought to be the amount Visa/Mastercard will pay UK issuers for UK spend, leaving them with 0.05% - they're still losing money on UK spend paid in full though because of all the other costs involved). The reason the 0.5% cashback card you have is still open, and hasn't been closed (like Freedom Rewards was recently, for example) will be that the overall customer-base with that legacy product is still profitable - I expect.

You need to make peace with the concept that many businesses offer products or services accepting that while not all customers will be profitable for them, overall the aim is to be profitable. Another example is supermarket fresh produce - these departments almost always make nothing or in the case of offers like Aldi's super 6 even lose money. They all compete on price in this department because of the 'halo effect' it has over the rest of their offer - but there's nothing to stop you only nipping in to Aldi, getting the veg on offer then leaving (and yes, there is a chunk of their customer base who do exactly that).

It's our job as consumers to play the field correctly to extract value maximally (balancing that off with other needs like convenience!).

zagfles

WillPS said:

zagfles said:

WillPS said:

zagfles said:

WillPS said:

zagfles said:

WillPS said:

zagfles said:

paul_c123 said:

zagfles said:

paul_c123 said:

The best way to screw a credit card company IS to spend heavily on it and pay the balance in full by the due date. So, at least you have the warm reassurance that you've already been doing it for years. 

Start being a bit sloppy with paying in full, a bit of interest or fees here and there, etc and the offers will come flooding at you.

How do you think that "screws" them? Credit card companies still make loads of money through the fees they charge retailers so they're quite happy with full payers, that's why they offer the specific interest free exemption for paying in full. Plus even cashback with some cards. IIRC something like 60% of people pay in full every month.  

1) Because it costs them to provide the infrastructure/service/etc of providing a credit card.
2) Because they're offering a credit line for free

Sure, they make money through retailers fees etc but its a competitive, marginal, industry. They won't make any money from full-payers. Its all relative.

Of course they make money from full payers. Over half CC users are full payers, why would they want such customers if they didn't make money from them? And even give them cashback on top with some cards. If they didn't want them or weren't making money from them they'd simply charge interest from the purchase date to the payment date with no exemption for full payers. 

They like full payers, because they're a reliable rock solid income stream. Obviously they'd prefer it if you pay them interest as well, but they know that anyone who manages their finance properly is never going to pay interest at credit card rates. So if they did charge everyone interest from the purchase date, then full payers would close their cards and use debit cards instead.

But they want full payers, hence the specific interest exemption for them. 

As with any business they'll have loss leaders, for instance 0% offers, but they're always temporary time-limited offers which require action by the customer to avoid big fees/interest at the end. Paying a card in full every month requires zero action after setting up a DD to pay in full, and can last decades. They're not going to have ongoing permanent loss leaders for half their customer base. 

The interchange rate for UK personal credit cards used in the UK is capped at 0.3%. That's the total amount which goes to Visa or Mastercard, and they will likely pay some of that (but not all of it, otherwise they'd make nothing!) to your issuer in commission. Think about the costs of providing an account to you - as one example, it costs a fiver for them to issue a card and have it sent to you; assuming Barclaycard get all the interchange revenue (and they wont!) it'd take £1667 of UK spend to cover its cost. Every bit of paper you receive in the post will have cost them at least a quid now too. This is before you try and figure out the cost of providing a working service and fulfilling their obligations (incl S275).

The interchange fee is only a small part of the fee paid by merchants. See UK Card Processing Fees | Don't Get Ripped Off (merchantsavvy.co.uk) 

Irrelevant, as the only part which works its way back to the issuer is derived from the interchange fee. The rest is retained by the acquiring bank, and used to cover their costs and provide them with a profit margin.

And guess who one of the biggest acquiring banks is? 26 UK Payment Processing Companies & Merchant Accounts (2024) (merchantsavvy.co.uk)

I don't think they'll be bothered whether they make money through being the card issuer or providing merchant services. So while they may only get 0.3% directly as an issuer, they'll get somewhere between 0.95% and 2.75% as merchant acquirer. As an acquirer they of course get their fees whatever bank's card is used, but I suspect there's a reasonable balance between issuers and merchant acquirers and that the bigger acquirers offer the best long term deals on cards (such as the BC rewards card, cashback and no forex fees) to try to maintain that balance. 

Plus who takes the hit for stuff like S75 claims etc? From what it says in that link about BC being very fussy about who it provides merchant services to, I would think it's the acquiring bank which takes the hit where the merchant has gone bust etc. Also what about timing of payments? Does the issuing bank pay the acquiring bank straight away or is it all totted up a month or two later? So who is effectively paying for the interest free period? 

S75 is settled by the issuer, who will normally try to obtain whatever they can from chargeback - the acquiring bank will pass this straight on the merchant, and will take the hit if not. The remnants (consequential losses etc) will come out of the issuer's own pocket, and so must be considered part of the cost of doing business.

Barclaycard's acquiring bank services aren't relevant when calculating individual personal customer profitability, as it is money they'd be collecting/earning on any card spend. Indeed, Barclaycard could spin off or close down the consumer credit card division alltogether (not saying they will, but they could) and each side would have similar profitability to that it does today - see also RBS/WorldPay.

Barclaycard aren't putting credit cards out there to make money from their other division's merchant fees; it's two separate bites of a giant pie.

Why do you think they are then? I've got a legacy BC that pays 0.5% cashback, I've had it for well over a decade. I've never paid a penny in interest on it, have a DD to pay it in full every month. 

It's simply not credible that BC are making a loss from that sort of usage, in the hope that one day you'll slip up and pay interest. If they only wanted interest payers then they'd charge everyone interest. Or have an introductory interest free period followed by immediate interest on everything. They wouldn't offer full payers the specific interest free exemption for decades on end, on top of cashback. Loss leaders are always temporary time limited things. 

Ah, so we're back to 'that can't be right'. It is, and the reason they are willing to pay for your business on an ongoing basis in the hope that you do something which makes you a profitable customer. Examples of which might include:

• paying interest
• using your card overseas (note overseas spend is also likely to reward the issuer with more interchange revenue too, hence why so many cards offer zero-FX now as every £ spent will earn far more than UK spend)
• payment of other fees
• using your card in such a way that the issuer earns them a commission, i.e. using the Avios card on BA.com or using the John Lewis NewDay card at Waitrose - or partaking in one of the 'on card cashback' offers they might offer
• using the relationship built with you to target you for other more profitable services, like loans, car inance, mortgages and savings
  

Or using the card at a retailer that uses BC merchant services. That's far more likely than any of the above. So the idea that you can ignore the acquirer charge is laughable when you mention a whole lot of other potential income streams that depend on less likely card usage. 

The whole of the EEA has the same interchange fee as the UK ie 0.3%, I suspect the majority of FX usage is in the EEA. 

Somebody

TLDR;  OP I was in a similar situation to you in wanting a "reward" card.  Barclaycard won't allow you to have more than one credit card, and as you found out wont let you change to another easily.  I went into a Barclays branch, showed my ID etc and they said they would request and nudge an "offer" to swap to appear in the app. 

I waited and waited for the app to offer me an alternative card, specifically the Reward card for the fee free F/X spend and cashback.  

In the end I cancelled the existing Barclaycard, waited 6 months, and applied and received the Reward card.

My main spend is on an Amex Platinum credit card, but wanted another to supplement the Halifax Clarity for overseas travel.

WillPS

zagfles said:

WillPS said:

zagfles said:

WillPS said:

zagfles said:

WillPS said:

zagfles said:

WillPS said:

zagfles said:

paul_c123 said:

zagfles said:

paul_c123 said:

The best way to screw a credit card company IS to spend heavily on it and pay the balance in full by the due date. So, at least you have the warm reassurance that you've already been doing it for years. 

Start being a bit sloppy with paying in full, a bit of interest or fees here and there, etc and the offers will come flooding at you.

How do you think that "screws" them? Credit card companies still make loads of money through the fees they charge retailers so they're quite happy with full payers, that's why they offer the specific interest free exemption for paying in full. Plus even cashback with some cards. IIRC something like 60% of people pay in full every month.  

1) Because it costs them to provide the infrastructure/service/etc of providing a credit card.
2) Because they're offering a credit line for free

Sure, they make money through retailers fees etc but its a competitive, marginal, industry. They won't make any money from full-payers. Its all relative.

Of course they make money from full payers. Over half CC users are full payers, why would they want such customers if they didn't make money from them? And even give them cashback on top with some cards. If they didn't want them or weren't making money from them they'd simply charge interest from the purchase date to the payment date with no exemption for full payers. 

They like full payers, because they're a reliable rock solid income stream. Obviously they'd prefer it if you pay them interest as well, but they know that anyone who manages their finance properly is never going to pay interest at credit card rates. So if they did charge everyone interest from the purchase date, then full payers would close their cards and use debit cards instead.

But they want full payers, hence the specific interest exemption for them. 

As with any business they'll have loss leaders, for instance 0% offers, but they're always temporary time-limited offers which require action by the customer to avoid big fees/interest at the end. Paying a card in full every month requires zero action after setting up a DD to pay in full, and can last decades. They're not going to have ongoing permanent loss leaders for half their customer base. 

The interchange rate for UK personal credit cards used in the UK is capped at 0.3%. That's the total amount which goes to Visa or Mastercard, and they will likely pay some of that (but not all of it, otherwise they'd make nothing!) to your issuer in commission. Think about the costs of providing an account to you - as one example, it costs a fiver for them to issue a card and have it sent to you; assuming Barclaycard get all the interchange revenue (and they wont!) it'd take £1667 of UK spend to cover its cost. Every bit of paper you receive in the post will have cost them at least a quid now too. This is before you try and figure out the cost of providing a working service and fulfilling their obligations (incl S275).

The interchange fee is only a small part of the fee paid by merchants. See UK Card Processing Fees | Don't Get Ripped Off (merchantsavvy.co.uk) 

Irrelevant, as the only part which works its way back to the issuer is derived from the interchange fee. The rest is retained by the acquiring bank, and used to cover their costs and provide them with a profit margin.

And guess who one of the biggest acquiring banks is? 26 UK Payment Processing Companies & Merchant Accounts (2024) (merchantsavvy.co.uk)

I don't think they'll be bothered whether they make money through being the card issuer or providing merchant services. So while they may only get 0.3% directly as an issuer, they'll get somewhere between 0.95% and 2.75% as merchant acquirer. As an acquirer they of course get their fees whatever bank's card is used, but I suspect there's a reasonable balance between issuers and merchant acquirers and that the bigger acquirers offer the best long term deals on cards (such as the BC rewards card, cashback and no forex fees) to try to maintain that balance. 

Plus who takes the hit for stuff like S75 claims etc? From what it says in that link about BC being very fussy about who it provides merchant services to, I would think it's the acquiring bank which takes the hit where the merchant has gone bust etc. Also what about timing of payments? Does the issuing bank pay the acquiring bank straight away or is it all totted up a month or two later? So who is effectively paying for the interest free period? 

S75 is settled by the issuer, who will normally try to obtain whatever they can from chargeback - the acquiring bank will pass this straight on the merchant, and will take the hit if not. The remnants (consequential losses etc) will come out of the issuer's own pocket, and so must be considered part of the cost of doing business.

Barclaycard's acquiring bank services aren't relevant when calculating individual personal customer profitability, as it is money they'd be collecting/earning on any card spend. Indeed, Barclaycard could spin off or close down the consumer credit card division alltogether (not saying they will, but they could) and each side would have similar profitability to that it does today - see also RBS/WorldPay.

Barclaycard aren't putting credit cards out there to make money from their other division's merchant fees; it's two separate bites of a giant pie.

Why do you think they are then? I've got a legacy BC that pays 0.5% cashback, I've had it for well over a decade. I've never paid a penny in interest on it, have a DD to pay it in full every month. 

It's simply not credible that BC are making a loss from that sort of usage, in the hope that one day you'll slip up and pay interest. If they only wanted interest payers then they'd charge everyone interest. Or have an introductory interest free period followed by immediate interest on everything. They wouldn't offer full payers the specific interest free exemption for decades on end, on top of cashback. Loss leaders are always temporary time limited things. 

Ah, so we're back to 'that can't be right'. It is, and the reason they are willing to pay for your business on an ongoing basis in the hope that you do something which makes you a profitable customer. Examples of which might include:

• paying interest
• using your card overseas (note overseas spend is also likely to reward the issuer with more interchange revenue too, hence why so many cards offer zero-FX now as every £ spent will earn far more than UK spend)
• payment of other fees
• using your card in such a way that the issuer earns them a commission, i.e. using the Avios card on BA.com or using the John Lewis NewDay card at Waitrose - or partaking in one of the 'on card cashback' offers they might offer
• using the relationship built with you to target you for other more profitable services, like loans, car inance, mortgages and savings
  

Or using the card at a retailer that uses BC merchant services. That's far more likely than any of the above. So the idea that you can ignore the acquirer charge is laughable when you mention a whole lot of other potential income streams that depend on less likely card usage.

We clearly aren't going to agree on this, but on the contrary I'd argue it's laughable that you think it should be considered; unless you believe without Barclaycard there would be less people paying by card (any card, doesn't matter which, as Barclaycard Merchant Services will charge for all of them)? That might have been true 30 years ago but it certainly isn't now. If Barclaycard (card issuance) shut up shop completely I doubt that any significant volumes would go back to cash.

Ask yourself - why would all the many card issuers who don't offer merchant services be in the game at all? The answer is that it's worth it to them, even accepting that a significant subset of issued cards will not be profitable in-and-of themselves.

zagfles said:

The whole of the EEA has the same interchange fee as the UK ie 0.3%, I suspect the majority of FX usage is in the EEA. 

The EEA does indeed have a 0.3% interchange cap, the same as the UK - however the UK is no longer in the EEA so UK issued cards are not subject to the cap when used in the EEA, and vice versa.

Point 2.2 in this document if you don't believe me: https://www.ukfinance.org.uk/system/files/2024-02/Cross Border Interchange Consultation Response.pdf

Like I said, there's a reason there's a rush towards offering cards with no FX fees, as that type of spend, even within the EEA, is now potentially profitable (even without an arbitrary % added on). It's also more likely to be the sort of spend which might end up not being payable-in-full, and thus interest becomes payable.

This is also the reason why Amazon were threatening to pull Visa credit card acceptance in the UK a few years ago, because Visa were able to demand an uncapped interchange % from Amazon EU S.a.r.L.

zagfles

WillPS said:

zagfles said:

WillPS said:

zagfles said:

WillPS said:

zagfles said:

WillPS said:

zagfles said:

WillPS said:

zagfles said:

paul_c123 said:

zagfles said:

paul_c123 said:

The best way to screw a credit card company IS to spend heavily on it and pay the balance in full by the due date. So, at least you have the warm reassurance that you've already been doing it for years. 

Start being a bit sloppy with paying in full, a bit of interest or fees here and there, etc and the offers will come flooding at you.

How do you think that "screws" them? Credit card companies still make loads of money through the fees they charge retailers so they're quite happy with full payers, that's why they offer the specific interest free exemption for paying in full. Plus even cashback with some cards. IIRC something like 60% of people pay in full every month.  

1) Because it costs them to provide the infrastructure/service/etc of providing a credit card.
2) Because they're offering a credit line for free

Sure, they make money through retailers fees etc but its a competitive, marginal, industry. They won't make any money from full-payers. Its all relative.

Of course they make money from full payers. Over half CC users are full payers, why would they want such customers if they didn't make money from them? And even give them cashback on top with some cards. If they didn't want them or weren't making money from them they'd simply charge interest from the purchase date to the payment date with no exemption for full payers. 

They like full payers, because they're a reliable rock solid income stream. Obviously they'd prefer it if you pay them interest as well, but they know that anyone who manages their finance properly is never going to pay interest at credit card rates. So if they did charge everyone interest from the purchase date, then full payers would close their cards and use debit cards instead.

But they want full payers, hence the specific interest exemption for them. 

As with any business they'll have loss leaders, for instance 0% offers, but they're always temporary time-limited offers which require action by the customer to avoid big fees/interest at the end. Paying a card in full every month requires zero action after setting up a DD to pay in full, and can last decades. They're not going to have ongoing permanent loss leaders for half their customer base. 

The interchange rate for UK personal credit cards used in the UK is capped at 0.3%. That's the total amount which goes to Visa or Mastercard, and they will likely pay some of that (but not all of it, otherwise they'd make nothing!) to your issuer in commission. Think about the costs of providing an account to you - as one example, it costs a fiver for them to issue a card and have it sent to you; assuming Barclaycard get all the interchange revenue (and they wont!) it'd take £1667 of UK spend to cover its cost. Every bit of paper you receive in the post will have cost them at least a quid now too. This is before you try and figure out the cost of providing a working service and fulfilling their obligations (incl S275).

The interchange fee is only a small part of the fee paid by merchants. See UK Card Processing Fees | Don't Get Ripped Off (merchantsavvy.co.uk) 

Irrelevant, as the only part which works its way back to the issuer is derived from the interchange fee. The rest is retained by the acquiring bank, and used to cover their costs and provide them with a profit margin.

And guess who one of the biggest acquiring banks is? 26 UK Payment Processing Companies & Merchant Accounts (2024) (merchantsavvy.co.uk)

I don't think they'll be bothered whether they make money through being the card issuer or providing merchant services. So while they may only get 0.3% directly as an issuer, they'll get somewhere between 0.95% and 2.75% as merchant acquirer. As an acquirer they of course get their fees whatever bank's card is used, but I suspect there's a reasonable balance between issuers and merchant acquirers and that the bigger acquirers offer the best long term deals on cards (such as the BC rewards card, cashback and no forex fees) to try to maintain that balance. 

Plus who takes the hit for stuff like S75 claims etc? From what it says in that link about BC being very fussy about who it provides merchant services to, I would think it's the acquiring bank which takes the hit where the merchant has gone bust etc. Also what about timing of payments? Does the issuing bank pay the acquiring bank straight away or is it all totted up a month or two later? So who is effectively paying for the interest free period? 

S75 is settled by the issuer, who will normally try to obtain whatever they can from chargeback - the acquiring bank will pass this straight on the merchant, and will take the hit if not. The remnants (consequential losses etc) will come out of the issuer's own pocket, and so must be considered part of the cost of doing business.

Barclaycard's acquiring bank services aren't relevant when calculating individual personal customer profitability, as it is money they'd be collecting/earning on any card spend. Indeed, Barclaycard could spin off or close down the consumer credit card division alltogether (not saying they will, but they could) and each side would have similar profitability to that it does today - see also RBS/WorldPay.

Barclaycard aren't putting credit cards out there to make money from their other division's merchant fees; it's two separate bites of a giant pie.

Why do you think they are then? I've got a legacy BC that pays 0.5% cashback, I've had it for well over a decade. I've never paid a penny in interest on it, have a DD to pay it in full every month. 

It's simply not credible that BC are making a loss from that sort of usage, in the hope that one day you'll slip up and pay interest. If they only wanted interest payers then they'd charge everyone interest. Or have an introductory interest free period followed by immediate interest on everything. They wouldn't offer full payers the specific interest free exemption for decades on end, on top of cashback. Loss leaders are always temporary time limited things. 

Ah, so we're back to 'that can't be right'. It is, and the reason they are willing to pay for your business on an ongoing basis in the hope that you do something which makes you a profitable customer. Examples of which might include:

• paying interest
• using your card overseas (note overseas spend is also likely to reward the issuer with more interchange revenue too, hence why so many cards offer zero-FX now as every £ spent will earn far more than UK spend)
• payment of other fees
• using your card in such a way that the issuer earns them a commission, i.e. using the Avios card on BA.com or using the John Lewis NewDay card at Waitrose - or partaking in one of the 'on card cashback' offers they might offer
• using the relationship built with you to target you for other more profitable services, like loans, car inance, mortgages and savings
  

Or using the card at a retailer that uses BC merchant services. That's far more likely than any of the above. So the idea that you can ignore the acquirer charge is laughable when you mention a whole lot of other potential income streams that depend on less likely card usage.

We clearly aren't going to agree on this, but on the contrary I'd argue it's laughable that you think it should be considered; unless you believe without Barclaycard there would be less people paying by card (any card, doesn't matter which, as Barclaycard Merchant Services will charge for all of them)? 

The 0.5%/0.25% cashback is clearly an incentive to use the BC credit card rather than a debit card (lower acquirer fee) or cash (no acquirer fee). 

That might have been true 30 years ago but it certainly isn't now. If Barclaycard (card issuance) shut up shop completely I doubt that any significant volumes would go back to cash.

Ask yourself - why would all the many card issuers who don't offer merchant services be in the game at all? The answer is that it's worth it to them, even accepting that a significant subset of issued cards will not be profitable in-and-of themselves.

Also ask yourself whether you think it's pure co-incidence that the one of the biggest merchant services providers also offers probably the best long term open ended deals for cardholders who pay in full. For some existing customers 0.5% cashback, for new customers 0.25% cashback on spending plus fee free ATM withdrawals treated the same as purchases for interest purposes (ie 25-56 days interest free if paid in full). 

I find the idea that you can accept cross subsidy between cardholders but not cross subsidy between the merchant side and customer side baffling. BC are one of the biggest card providers and they set a high bar. If they were to withdraw from cardholder side of the market, it's almost certain that other CC providers would offer less competitive terms. Maybe even abandon the decades old practice of exempting full payers from interest. That's not something BC would want to see, as it'd almost certainly see a big switch away from credit cards and towards debit cards, and perhaps newer methods of payment. 

The EEA does indeed have a 0.3% interchange cap, the same as the UK - however the UK is no longer in the EEA so UK issued cards are not subject to the cap when used in the EEA, and vice versa.

Point 2.2 in this document if you don't believe me: https://www.ukfinance.org.uk/system/files/2024-02/Cross Border Interchange Consultation Response.pdf

The footnote to that points here Antitrust: Commission accepts commitments by Mastercard and Visa to cut inter-regional interchange fees (europa.eu) which AIUI is saying that VISA/Mastercard have committed to maintaining the 0.3% fee till at least the end of this year, for cardholder present transactions. 

Like I said, there's a reason there's a rush towards offering cards with no FX fees, as that type of spend, even within the EEA, is now potentially profitable (even without an arbitrary % added on). It's also more likely to be the sort of spend which might end up not being payable-in-full, and thus interest becomes payable.

This is also the reason why Amazon were threatening to pull Visa credit card acceptance in the UK a few years ago, because Visa were able to demand an uncapped interchange % from Amazon EU S.a.r.L.

Is there a rush? A few extra banks/cards are offering free FX but I think the vast majority still charge around 3%. 

Re Amazon, they're clearly CNP transactions, so as per the link above, the higher 1.5% charge applies. But for someone going abroad and spending locally, the 0.3% interchange fee still applies according to your link. 

WillPS

zagfles said:

The 0.5%/0.25% cashback is clearly an incentive to use the BC credit card rather than a debit card (lower acquirer fee) or cash (no acquirer fee).

Yes, but also higher interchange fees payable. Again, Barclaycard Payments are not earning more when a Barclaycard credit card is used over any other credit card with the same payment symbol - the same interchange fee caps apply. The only potential arbitrage for them would be if they cut out the payment networks - which I think they might do - but still that'd only mean they keep all 0.3% of the interchange fee, rather than sharing it with Visa/Mastercard (presuming the 0.25% figure represents what Visa will pay them of their 0.3%, this would make all of 0.05% difference; or £1 for every £2000 spent at Barclaycard merchants!!).

zagfles said:

Also ask yourself whether you think it's pure co-incidence that the one of the biggest merchant services providers also offers probably the best long term open ended deals for cardholders who pay in full. For some existing customers 0.5% cashback, for new customers 0.25% cashback on spending plus fee free ATM withdrawals treated the same as purchases for interest purposes (ie 25-56 days interest free if paid in full).

The simple answer is they absolutely don't. Their offers are mostly good but not exceptional. For everything except cash withdrawals and very high spend the Santander Edge credit card is significantly more generous, even ignoring the bonus in the first year, for example. (Or is your position that they're offering a 1/2% credit card as a boost somehow for the comparitively tiny Santander Merchant Services?)

Natwest offer a similar range of cards, and yet only have a very small psuedo-start-up presence in the merchant services market (Tyl).

Amex on the other hand legitimately do have an upper hand here because of their own payment network, although even they are subject to the interchange fee cap on co-branded cards. 

zagfles said:

I find the idea that you can accept cross subsidy between cardholders but not cross subsidy between the merchant side and customer side baffling. BC are one of the biggest card providers and they set a high bar. If they were to withdraw from cardholder side of the market, it's almost certain that other CC providers would offer less competitive terms. Maybe even abandon the decades old practice of exempting full payers from interest. That's not something BC would want to see, as it'd almost certainly see a big switch away from credit cards and towards debit cards, and perhaps newer methods of payment.

We're delving in to hypotheticals quite deeply now, clearly Barclaycard are not about to pack up and as for the extent to which the marketplace depends on Barclaycard - that's anyone's guess.

What we do know is that RBS didn't stop offering credit cards when they were forced to sell of WorldPay - far from it, they actually launched a series of market leading deals. Virgin Money, TSB, Nationwide, NewDay, Jaja, Monzo and Co-op Bank all offer personal credit cards and have no acquiring bank offering of their own - but Barclaycard Merchant Services will be earning merchant fees whenever their cards are used in their merchants (which consumers are, correctly, blind to).

Barclaycard (personal) and Barclaycard Payments are literally two businesses branded similarly under the same mother ship. There is no evidence of any "cross-subsidising" between them, nor would it make sense for them to.

We can agree to disagree if you like, perhaps to prevent the further splitting of hairs we could settle on stating that all issuers do not make significant amounts from customers who spend in the UK and clear their balance in full, unless the transactions were commission incentivised (i.e. partner deals)?

zagfles said:

The footnote to that points here Antitrust: Commission accepts commitments by Mastercard and Visa to cut inter-regional interchange fees (europa.eu) which AIUI is saying that VISA/Mastercard have committed to maintaining the 0.3% fee till at least the end of this year, for cardholder present transactions.

No, that's saying there's a commitment to the inter-regional rate - 1.5%. It's very possible to make money on cards cleared in full when 1%+ has been achieved in interchange commission. Even room to share some of that back with the customer and still make money - indeed this was how the market worked before the interchange fee cap came in.

zagfles said:

Is there a rush? A few extra banks/cards are offering free FX but I think the vast majority still charge around 3%.

Yeah, absolutely there is. When the interchange fee cap came about, the only open-ended deals were from Creation and Halifax. Often the other brands would temporarily pause their FX fees, or offer an FX free period. There were I think a couple that didn't charge FX in SEPA countries (Virgin Money still don't).

Now pretty much every player has a zero FX offering, even the relative minnows like Nationwide are doing it. I think the only offers which don't have one are TSB and Co-op Bank (both of which have very stagnant offerings!).

zagfles said:

Re Amazon, they're clearly CNP transactions, so as per the link above, the higher 1.5% charge applies. But for someone going abroad and spending locally, the 0.3% interchange fee still applies according to your link. 

Until recently, when you paid Amazon UK were in fact paying a Luxembourg registered entity. Although it didn't feel like it, you were buying your goods from a company in the EU, not the UK, even post-Brexit. Visa began  (or at least notified Amazon of their intention to begin) charging the full allowed rate of 1.5% in interchange, and Amazon's response was to announce they were dropping support.

They've re-organised now so that you're paying a business registered in London; I presume the interchange fee cap was a motivating factor for this.

You can google for more details if you wish.

zagfles

WillPS said:

zagfles said:

The 0.5%/0.25% cashback is clearly an incentive to use the BC credit card rather than a debit card (lower acquirer fee) or cash (no acquirer fee).

Yes, but also higher interchange fees payable. Again, Barclaycard Payments are not earning more when a Barclaycard credit card is used over any other credit card with the same payment symbol - the same interchange fee caps apply. 

Going round in circles now....been addressed. 

zagfles said:

Also ask yourself whether you think it's pure co-incidence that the one of the biggest merchant services providers also offers probably the best long term open ended deals for cardholders who pay in full. For some existing customers 0.5% cashback, for new customers 0.25% cashback on spending plus fee free ATM withdrawals treated the same as purchases for interest purposes (ie 25-56 days interest free if paid in full).

The simple answer is they absolutely don't. Their offers are mostly good but not exceptional. For everything except cash withdrawals and very high spend the Santander Edge credit card is significantly more generous, even ignoring the bonus in the first year, for example. (Or is your position that they're offering a 1/2% credit card as a boost somehow for the comparitively tiny Santander Merchant Services?)

The Edge has a monthly fee, plus requires a Santander current account. 

zagfles said:

I find the idea that you can accept cross subsidy between cardholders but not cross subsidy between the merchant side and customer side baffling. BC are one of the biggest card providers and they set a high bar. If they were to withdraw from cardholder side of the market, it's almost certain that other CC providers would offer less competitive terms. Maybe even abandon the decades old practice of exempting full payers from interest. That's not something BC would want to see, as it'd almost certainly see a big switch away from credit cards and towards debit cards, and perhaps newer methods of payment.

We're delving in to hypotheticals quite deeply now, clearly Barclaycard are not about to pack up and as for the extent to which the marketplace depends on Barclaycard - that's anyone's guess.

What we do know is that RBS didn't stop offering credit cards when they were forced to sell of WorldPay - far from it, they actually launched a series of market leading deals. Virgin Money, TSB, Nationwide, NewDay, Jaja, Monzo and Co-op Bank all offer personal credit cards and have no acquiring bank offering of their own - but Barclaycard Merchant Services will be earning merchant fees whenever their cards are used in their merchants (which consumers are, correctly, blind to).

Again, with strings. eg Nationwide now only offer a "member" credit card, which means you have to have another product with them to become a member. 

zagfles said:

The footnote to that points here Antitrust: Commission accepts commitments by Mastercard and Visa to cut inter-regional interchange fees (europa.eu) which AIUI is saying that VISA/Mastercard have committed to maintaining the 0.3% fee till at least the end of this year, for cardholder present transactions.

No, that's saying there's a commitment to the inter-regional rate - 1.5%. It's very possible to make money on cards cleared in full when 1%+ has been achieved in interchange commission. Even room to share some of that back with the customer and still make money - indeed this was how the market worked before the interchange fee cap came in.

That link clearly states the inter-regional rate is 0.3% for "...card payments carried out by the cardholder in a shop ("Card Present Transactions"):".

The only mention of 1.5% is for CNP transactions, eg online like Amazon etc. 

zagfles said:

Is there a rush? A few extra banks/cards are offering free FX but I think the vast majority still charge around 3%.

Yeah, absolutely there is. When the interchange fee cap came about, the only open-ended deals were from Creation and Halifax. Often the other brands would temporarily pause their FX fees, or offer an FX free period. There were I think a couple that didn't charge FX in SEPA countries (Virgin Money still don't).

Now pretty much every player has a zero FX offering, even the relative minnows like Nationwide are doing it. I think the only offers which don't have one are TSB and Co-op Bank (both of which have very stagnant offerings!).

Nationwide have been offering open-ended zero FX credit cards for decades on various cards. At least 25 years, I remember using them last century!! 

WillPS

zagfles said:

WillPS said:

zagfles said:

The 0.5%/0.25% cashback is clearly an incentive to use the BC credit card rather than a debit card (lower acquirer fee) or cash (no acquirer fee).

Yes, but also higher interchange fees payable. Again, Barclaycard Payments are not earning more when a Barclaycard credit card is used over any other credit card with the same payment symbol - the same interchange fee caps apply. 

Going round in circles now....been addressed.

No, it hasn't... there's no explanation why Barclaycard Payments are reliant on a Barclaycard retail offer at all. There's a pretty wild prediction that without Barclaycard retail they'd make less money - and I agree that may have been the case had this happened 30 years ago, but not any more. I'm not even convinced there'd be significantly less actively used credit cards if this happened. But that's total speculation - what's absolutely known is that Barclaycard Payments make money from every single payment card used, and don't make any more or less whether it's a Barclaycard Cashback Card or any other Visa/Mastercard credit card.

We can agree to disagree, but you can't just suggest something has "been addressed" unless it actually has.

zagfles said:

zagfles said:

Also ask yourself whether you think it's pure co-incidence that the one of the biggest merchant services providers also offers probably the best long term open ended deals for cardholders who pay in full. For some existing customers 0.5% cashback, for new customers 0.25% cashback on spending plus fee free ATM withdrawals treated the same as purchases for interest purposes (ie 25-56 days interest free if paid in full).

The simple answer is they absolutely don't. Their offers are mostly good but not exceptional. For everything except cash withdrawals and very high spend the Santander Edge credit card is significantly more generous, even ignoring the bonus in the first year, for example. (Or is your position that they're offering a 1/2% credit card as a boost somehow for the comparitively tiny Santander Merchant Services?)

The Edge has a monthly fee, plus requires a Santander current account. 
...
Again, with strings. eg Nationwide now only offer a "member" credit card, which means you have to have another product with them to become a member.

I think your "probably the best long term open ended deals for cardholders who pay in full" statement was rather narrow in its consideration of the market in that case.

For 0% purchases/balance transfers, Barclaycard are rarely a market leader

For domestic cashback/rewards, Barclaycard are beaten - in fact they're pretty low down the order; even ignoring Amex

For perks, Barclaycard offer almost none outside of their premium £240/year Avios product

For travel usage, I agree, they have a very strong offer - but going back to your original point "ask yourself whether you think it's pure co-incidence that the one of the biggest merchant services providers" - Barclaycard Payments are not one of the biggest merchant service providers outside the UK, so I'm afraid it kind of undermines your inference. In fact, it actually suggests Barclaycard (retail) are going after spend which makes their own products profitable in-and-of-themselves.

zagfles said:

Nationwide have been offering open-ended zero FX credit cards for decades on various cards. At least 25 years, I remember using them last century!! 

I think your mind might be playing tricks, this definitely was not the case in 2015, the nearest they came was: https://web.archive.org/web/20170216174124/http://www.nationwide.co.uk/products/credit-cards/ncc/managing-your-card#xtab:tab2

Earn commission-free spending with rewards for abroad As a Nationwide Credit Card holder you’ll also be rewarded with a commission-free allowance for all purchases made in pounds Sterling For example, if you spend £100 on your shopping in a month (UK, Sterling) you'll automatically be rewarded with £20 worth of commission-free allowances to use on purchases in a foreign currency. Any spend over your allowance will incur a 2% fee.

Hardly a viable option for travel usage. For clarity, I'm not disputing what they did in the 20th century but that's not really in scope for discussion of the effects of the interchange fee cap.

zagfles

WillPS said:

zagfles said:

WillPS said:

zagfles said:

The 0.5%/0.25% cashback is clearly an incentive to use the BC credit card rather than a debit card (lower acquirer fee) or cash (no acquirer fee).

Yes, but also higher interchange fees payable. Again, Barclaycard Payments are not earning more when a Barclaycard credit card is used over any other credit card with the same payment symbol - the same interchange fee caps apply. 

Going round in circles now....been addressed.

No, it hasn't... there's no explanation why Barclaycard Payments are reliant on a Barclaycard retail offer at all. There's a pretty wild prediction that without Barclaycard retail they'd make less money - and I agree that may have been the case had this happened 30 years ago, but not any more. I'm not even convinced there'd be significantly less actively used credit cards if this happened. But that's total speculation - what's absolutely known is that Barclaycard Payments make money from every single payment card used, and don't make any more or less whether it's a Barclaycard Cashback Card or any other Visa/Mastercard credit card.

We can agree to disagree, but you can't just suggest something has "been addressed" unless it actually has.

Whatever, I'm not repeating myself. 

I think your "probably the best long term open ended deals for cardholders who pay in full" statement was rather narrow in its consideration of the market in that case.

For 0% purchases/balance transfers, Barclaycard are rarely a market leader

Maybe you can tell us who does an "open ended" 0% purchase/balance transfer.

For domestic cashback/rewards, Barclaycard are beaten - in fact they're pretty low down the order; even ignoring Amex

On what no strings, no fee card? 

zagfles said:

Nationwide have been offering open-ended zero FX credit cards for decades on various cards. At least 25 years, I remember using them last century!! 

I think your mind might be playing tricks, this definitely was not the case in 2015, the nearest they came was: https://web.archive.org/web/20170216174124/http://www.nationwide.co.uk/products/credit-cards/ncc/managing-your-card#xtab:tab2

Earn commission-free spending with rewards for abroad As a Nationwide Credit Card holder you’ll also be rewarded with a commission-free allowance for all purchases made in pounds Sterling For example, if you spend £100 on your shopping in a month (UK, Sterling) you'll automatically be rewarded with £20 worth of commission-free allowances to use on purchases in a foreign currency. Any spend over your allowance will incur a 2% fee.

Hardly a viable option for travel usage. For clarity, I'm not disputing what they did in the 20th century but that's not really in scope for discussion of the effects of the interchange fee cap.

They did for a short while have a card that you had to "earn" commission fee FX spend. But before and after that they had cards which were completely FX free for foreign purchases. Loads of discussions on the travel board prove this, eg 
Cards frr Overseas Use ... — MoneySavingExpert Forum
How to buy travellers cheques or foreign currency - Page 3 — MoneySavingExpert Forum
Martin himself contributed to the latter - shows how long ago it was!!

Anyway - I think we're through - this could go on forever!