4 ms·

Cards don't make money from their fees. They make money from people who fail to pay and then pay the ridiculous interest.

apparent 7mo ago
Do people who pay ridiculous interest qualify for 2% cards? Honest question; I don't carry a balance so have no idea what is advertised at other types of consumers.
- SoftTalker 7mo ago
  Why not? I'd gladly pay you 2% of $1,000 if you pay me 21%
  - apparent 7mo ago
    I was just under the impression that the cards with the best benefits were somewhat harder to get. I do understand that credit card companies make money on interest and late fees, so they should find consumers to be attractive so long as they ultimately pay the bill/interest. I guess the question is whether they can distinguish between people who are going to carry a balance but ultimately pay and people who are a true default/bankruptcy risk.
- fn-mote 7mo ago
  What matters is their credit rating, not how much they carry as a balance. (However, that can affect their credit rating.)
bumby 7mo ago
Interchange fees seem to be a sizable portion of revenue. Discover has listed them as 29% of revenue, BoA at ~$10B annually…
- drdec 7mo ago
  Revenue does not equal profit
  - bumby 7mo ago
    If you could identify where fees get decoupled from profit in finance, I’d be open to the position that they aren’t related but you didn’t share anything along those lines. Considering the costs like cash-back programs that would erode the profitability of those fees are largely in the banks control, I don’t think that is a strong position.
    - drdec 7mo ago
      You are the one implying that the revenue becomes profit. The burden is on you to make the case not on me to prove a negative. There are plenty of high revenue low margin businesses. There are also low revenue high margin businesses. So there is not a direct correlation between revenue and profit.
      - bumby 7mo ago
        This is bordering on a non-productive discussion but: Yes, revenue provides cash flow, not profit. And costs provide the other part, as was already mentioned. But if it increases cash flow without increasing relative costs, it increases profit. Do you think banks would charge fees if they could make more money by removing them? Again, the banks are largely in control of these costs, like the amount of cash back they provide. For example, the federal reserve reports that bank fees account for 1.82% of purchase volume, while cash back programs account for 1.57% of purchase volume. In other words, they make a profit on balance. You can read the financial statements to get more information. That's where the above numbers came from. They don't generally say "Fees contribute to X% of profits" but they do indicate they are relatively large parts of revenue. For example, JPMorgan lists $5.97B in fee revenue and rewards cost $4.28B, with the difference being profit. So where are the extra costs you are implying coming from that make fees a net cost?
        7mo ago

apparent 7mo ago

Do people who pay ridiculous interest qualify for 2% cards? Honest question; I don't carry a balance so have no idea what is advertised at other types of consumers.

SoftTalker 7mo ago
Why not? I'd gladly pay you 2% of $1,000 if you pay me 21%
- apparent 7mo ago
  I was just under the impression that the cards with the best benefits were somewhat harder to get. I do understand that credit card companies make money on interest and late fees, so they should find consumers to be attractive so long as they ultimately pay the bill/interest. I guess the question is whether they can distinguish between people who are going to carry a balance but ultimately pay and people who are a true default/bankruptcy risk.
fn-mote 7mo ago
What matters is their credit rating, not how much they carry as a balance. (However, that can affect their credit rating.)

bumby 7mo ago

Interchange fees seem to be a sizable portion of revenue. Discover has listed them as 29% of revenue, BoA at ~$10B annually…

drdec 7mo ago
Revenue does not equal profit
- bumby 7mo ago
  If you could identify where fees get decoupled from profit in finance, I’d be open to the position that they aren’t related but you didn’t share anything along those lines. Considering the costs like cash-back programs that would erode the profitability of those fees are largely in the banks control, I don’t think that is a strong position.
  - drdec 7mo ago
    You are the one implying that the revenue becomes profit. The burden is on you to make the case not on me to prove a negative. There are plenty of high revenue low margin businesses. There are also low revenue high margin businesses. So there is not a direct correlation between revenue and profit.
    - bumby 7mo ago
      This is bordering on a non-productive discussion but: Yes, revenue provides cash flow, not profit. And costs provide the other part, as was already mentioned. But if it increases cash flow without increasing relative costs, it increases profit. Do you think banks would charge fees if they could make more money by removing them? Again, the banks are largely in control of these costs, like the amount of cash back they provide. For example, the federal reserve reports that bank fees account for 1.82% of purchase volume, while cash back programs account for 1.57% of purchase volume. In other words, they make a profit on balance. You can read the financial statements to get more information. That's where the above numbers came from. They don't generally say "Fees contribute to X% of profits" but they do indicate they are relatively large parts of revenue. For example, JPMorgan lists $5.97B in fee revenue and rewards cost $4.28B, with the difference being profit. So where are the extra costs you are implying coming from that make fees a net cost?
      - 7mo ago