4 ms·
They do not pay the whole cash back, but they do pay more for "premium" cards (that they cannot refuse, also). See for instance this https://www.cfib-fcei.ca/si
by kalenx 7y ago
They do not pay the whole cash back, but they do pay more for "premium" cards (that they cannot refuse, also). See for instance this https://www.cfib-fcei.ca/sites/default/files/pdf/5513.pdf https://www.cfib-fcei.ca/sites/default/files/pdf/5513.pdf (in Canada, but the same thing applies to the US)
- mehrdadn 7y agoRight, these are just Visa/MC/etc. card classes, which don't determine the cash back on them. And so if that doesn't make up the difference, then the card companies paying the rest, right? My point is that for high-cash-back cards there are easily customers who consistently make more in cash back than whatever fees these folks get and who don't rack up interest, meaning they're costing money, so why should they still be kept as customers?
- ceejayoz 7y agoEnough of them wind up over-extending and paying interest to make it lucrative. I'm also not aware of any across-the-board 5% rewards cards, and most have an "up to $x,000 annual spend" on the categories that are that high.
- mehrdadn 7y ago> Enough of them wind up over-extending and paying interest to make it lucrative. Yes. I understand this. I'm asking, why do they keep the others' accounts open? > I'm also not aware of any across-the-board 5% rewards cards I'm not either, but many people just rotate to a different card instead of using the same card for less cash back. And who never miss a payment or rack up interest. Meaning they always use those cards at a loss for the company. I'm asking why do these peoples' accounts get kept open.
- kccqzy 7y ago> why do they keep the others' accounts open? It's a loss leader.
- mehrdadn 7y agoEven for people who have years of history showing they have no intention of taking the bait?
- ceejayoz 7y agoI suspect you're overestimating how many of those there are.
- mehrdadn 7y agoI suspect you're underestimating? A lot of people (around half of Americans if not more) don't carry a balance. I don't know what fraction of them try to extract the most from their cards, but judging from the sheer number of websites that explain what card you should get to maximize which reward and bonus, I'm skeptical that the number of people who pay attention to this is negligible enough that it'd cost companies more to simply close their accounts than to let them go on.
- ceejayoz 7y agoMy explanation seems more likely than the credit card companies acting as a money-losing charity towards rewards maximizers, doesn't it?
- tzs 7y agoA neat little hack with some cards can make it effectively almost across-the-board. Some rewards cards let you select "online shopping" as your high rewards category. You can extend that to in-store shopping at Walmart by enrolling that card in Walmart Pay and then paying in-store via that. For a lot of people, "online shopping" and Walmart together will cover 95+% of their credit card use.
- kube-system 7y agoAre there any of those that are 5%? If so I’m very interested.
- tzs 7y agoBofA has a card that is 3% in your selected category, which can be boosted to 5.25% if you have a large enough total in your accounts at BofA and Merrill Lynch. The base card is 3% in your selected category (online shopping; gas; dinning; travel; drug stores; or home improvement and furnishing), 2% in grocery and wholesale clubs, 1% everything else. The 3% and 2% are limited to $2500 per quarter. The base rate is multiplied by 1.25, 1.5, or 1.75 if your total at BofA and Merrill Lynch is at least $20k, $50k, or $100k, respectively.