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The pejorative term that credit card companies use for people who pay off the entire balance every month is "deadbeats". https://www.cnbc.com/select/credit-card

The pejorative term that credit card companies use for people who pay off the entire balance every month is "deadbeats". https://www.cnbc.com/select/credit-card-deadbeat/ https://www.cnbc.com/select/credit-card-deadbeat/

sleepybrett 2y ago
I mean, deadbeats are probably still worth it in the long run. Over a long enough horizon eventually a person who pays off their cards every month runs into an emergency that will put them in a situation where they get stuck in a debit trap, them the banks eat for free.
denimnerd42 2y ago
I guess. Revolving credit is expensive for the bank to hold. They have to allocate a lot of capital to back the revolving unsecured debt compared to other secured loans. I think they'd rather just make money on the regular fees and not have to worry about people holding balances. By providing credit they can charge a higher transaction fee than a debit card so that's their value add. Retailers are willing to pay for that access to consumer credit. That's why credit cards are so popular in America vs other countries. They can charge a transaction fee that actually makes a profit. If they are regulated to a low fee then they can't give cards to anyone but the highest of FICO scores because the debt itself is so risky.
- Finnucane 2y ago
  The interest and fees on accounts that carry a balance are enormously lucrative for the banks.
  - denimnerd42 2y ago
    I don't know.. Maybe in the good times. They are highly risky though and require a lot of capital backing that may not show up directly on the P&L. https://www.reuters.com/business/finance/bank-america-profit-falls-lower-customer-interest-payments-2024-04-16/ https://www.reuters.com/business/finance/bank-america-profit... I guess I could look more into the 10-K and see if that information is transparent to the public.
darth_avocado 2y ago
Meanwhile, if I don't pay off my balance, they ding my credit scores. Seems like they want to have their cake and eat it too.
huntedsnark 2y ago
This anecdote and using the word "deadbeat" is oft repeated but doesn't really have much basis in reality (even the article you linked doesn't cite any sources for the term). Credit card transaction fees generate revenue regardless of when you pay.

sleepybrett 2y ago

I mean, deadbeats are probably still worth it in the long run. Over a long enough horizon eventually a person who pays off their cards every month runs into an emergency that will put them in a situation where they get stuck in a debit trap, them the banks eat for free.

denimnerd42 2y ago

I guess. Revolving credit is expensive for the bank to hold. They have to allocate a lot of capital to back the revolving unsecured debt compared to other secured loans. I think they'd rather just make money on the regular fees and not have to worry about people holding balances. By providing credit they can charge a higher transaction fee than a debit card so that's their value add. Retailers are willing to pay for that access to consumer credit. That's why credit cards are so popular in America vs other countries. They can charge a transaction fee that actually makes a profit. If they are regulated to a low fee then they can't give cards to anyone but the highest of FICO scores because the debt itself is so risky.

Finnucane 2y ago
The interest and fees on accounts that carry a balance are enormously lucrative for the banks.
- denimnerd42 2y ago
  I don't know.. Maybe in the good times. They are highly risky though and require a lot of capital backing that may not show up directly on the P&L. https://www.reuters.com/business/finance/bank-america-profit-falls-lower-customer-interest-payments-2024-04-16/ https://www.reuters.com/business/finance/bank-america-profit... I guess I could look more into the 10-K and see if that information is transparent to the public.

darth_avocado 2y ago

Meanwhile, if I don't pay off my balance, they ding my credit scores. Seems like they want to have their cake and eat it too.

huntedsnark 2y ago

This anecdote and using the word "deadbeat" is oft repeated but doesn't really have much basis in reality (even the article you linked doesn't cite any sources for the term). Credit card transaction fees generate revenue regardless of when you pay.