cashnocredit Posted May 27 Share Posted May 27 Here's how banks finance credit card rewards (cnbc.com) Interesting overview of the rewards credit card business model. 18 minutes. StarkRaven$ 1 Quote Link to comment Share on other sites More sharing options...
hdporter Posted May 27 Share Posted May 27 Brought to you from the folks who revealed the amazing disclosure that there's a positive correlation between supersizing your value meal and obesity !! (no aspersion intended, @cashnocredit! It's just when the video revealed the fact that poorer households reap less rewards than they pay in interest on these cards, I had to shut the window ... this was after sticking in there once I was informed that banks would prefer to get their cards into the hands of those who carry balances.) TheVig and cashnocredit 2 Quote Link to comment Share on other sites More sharing options...
cashnocredit Posted May 28 Author Share Posted May 28 28 minutes ago, hdporter said: Brought to you from the folks who revealed the amazing disclosure that there's a positive correlation between supersizing your value meal and obesity !! (no aspersion intended, @cashnocredit! It's just when the video revealed the fact that poorer households reap less rewards than they pay in interest on these cards, I had to shut the window ... this was after sticking in there once I was informed that banks would prefer to get their cards into the hands of those who carry balances.) Really! Of course the Rewards are designed to entice people that carry a balance. Capital One's own data showed that transactions fees were only 2/3 of the rewards they paid. It would be a losing proposition if there weren't lots of people paying interest to overcome that 1/3 deficit. The C1 spokesperson's claim that rewards card income aren't subisidized by interest payers is rather disengenuous. Should be obvious that PIF is what makes rewards cards attractive. Probably most know this but just can't resist buy now pay later and get sucked in. Quote Link to comment Share on other sites More sharing options...
StarkRaven$ Posted May 28 Share Posted May 28 1 hour ago, cashnocredit said: Really! Of course the Rewards are designed to entice people that carry a balance. Capital One's own data showed that transactions fees were only 2/3 of the rewards they paid. It would be a losing proposition if there weren't lots of people paying interest to overcome that 1/3 deficit. The C1 spokesperson's claim that rewards card income aren't subisidized by interest payers is rather disengenuous. Should be obvious that PIF is what makes rewards cards attractive. Probably most know this but just can't resist buy now pay later and get sucked in. The problem I have with the video is the claim that customers with lower credit scores are getting "approved" for these cards. My understanding has always been that if I have stained credit reports I wouldn't get approved for say a Amex Blue Cash Rewards card. TheVig and cashnocredit 2 Quote Link to comment Share on other sites More sharing options...
cashnocredit Posted May 28 Author Share Posted May 28 28 minutes ago, StarkRaven$ said: The problem I have with the video is the claim that customers with lower credit scores are getting "approved" for these cards. My understanding has always been that if I have stained credit reports I wouldn't get approved for say a Amex Blue Cash Rewards card. Good observation. What they want are consumers that will run balances but are still not likely to default. They are not going after people with poor credit. The ideal customer spends beyond their capacity to repay each month but won't default. These are likely to have good or even excellent credit scores. I don't agree with the study that says people aren't financially literate enough to understand interest costs can easily greatly exceed rewards. Most people are quite aware of costs. More a case of lacking deferred gratification. There are times getting something now and paying more later is worth it. It just should be rare. StarkRaven$ and hdporter 2 Quote Link to comment Share on other sites More sharing options...
hdporter Posted May 28 Share Posted May 28 8 hours ago, cashnocredit said: I don't agree with the study that says people aren't financially literate enough to understand interest costs can easily greatly exceed rewards. Most people are quite aware of costs. More a case of lacking deferred gratification. T Thank you. Going back to my "dining" analogy, this is akin to saying that people who dine at fast food restaurants aren't aware that calorie/sodium-laden food items aren't the best diet selections. The video repeatedly treads up to the edge of seeking "perpetrators/victims" within the credit card industry. I find the notion that "rewards" lead people to overspend laughable. Really? 2 cents back on every dollar might be sufficient incentive to choose one card over another for their transactions but, as I recall in the murky past, even before card rewards people got themselves in trouble with credit card debt. Since I didn't hang in there until the end, did the video ultimately make the argument that reward cards should be eradicated for the benefit of credit card users? Quote Link to comment Share on other sites More sharing options...
StarkRaven$ Posted May 28 Share Posted May 28 44 minutes ago, hdporter said: Thank you. Going back to my "dining" analogy, this is akin to saying that people who dine at fast food restaurants aren't aware that calorie/sodium-laden food items aren't the best diet selections. The video repeatedly treads up to the edge of seeking "perpetrators/victims" within the credit card industry. I find the notion that "rewards" lead people to overspend laughable. Really? 2 cents back on every dollar might be sufficient incentive to choose one card over another for their transactions but, as I recall in the murky past, even before card rewards people got themselves in trouble with credit card debt. Since I didn't hang in there until the end, did the video ultimately make the argument that reward cards should be eradicated for the benefit of credit card users? No but they in as much insinuated it. You could not even earn rewards if you carry a huge balance. They suggest that credit card issuers need to do a better job of teaching their customers financial literacy. If the consumer refuses to read cc contract's terms how do you force them to? Next thing you know they'll be writing about how reward cc's should have a lower APR. hdporter, TheVig and cashnocredit 3 Quote Link to comment Share on other sites More sharing options...
cashnocredit Posted May 29 Author Share Posted May 29 On 5/28/2023 at 3:57 AM, hdporter said: The video repeatedly treads up to the edge of seeking "perpetrators/victims" within the credit card industry. Yeah. Seems to be the slant of lots of stories these days. I tend to just skip that crap. I found the actual numbers informative and skipped the bs. Quote Link to comment Share on other sites More sharing options...
hdporter Posted May 30 Share Posted May 30 On 5/28/2023 at 7:50 AM, StarkRaven$ said: If the consumer refuses to read cc contract's terms how do you force them to? Horses and water, eh? 😄 StarkRaven$ 1 Quote Link to comment Share on other sites More sharing options...
StarkRaven$ Posted June 1 Share Posted June 1 On 5/29/2023 at 6:34 PM, hdporter said: Horses and water, eh? 😄 More like stubborn mules and water. 😉 Quote Link to comment Share on other sites More sharing options...
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