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I always assumed banks made money on credit cards from the transaction fees. I think the interest rates are mostly there to scare you into paying your bill. It
by denimnerd42 2y ago
I always assumed banks made money on credit cards from the transaction fees. I think the interest rates are mostly there to scare you into paying your bill. It seems like once a CC balance gets out of control the bank's ability to recapture that money is limited since the card is unsecured.
I guess they make more money off the people that use a CC as as a temporary loan and always repay but customers with that risk profile are generally one step away from never paying it off.
- perks_12 2y agoFYI, latest Q-10 of American Express has Merchant Fees at approximately double the revenue from interest payments. At least there it is true. [0]: https://s26.q4cdn.com/747928648/files/doc_financials/2024/q1/Q1-2024-Earnings-Tables.pdf https://s26.q4cdn.com/747928648/files/doc_financials/2024/q1...
- denimnerd42 2y agoAnd the fees are basically pure profit while the interest payments have a huge cost and risk.