Michael Wendt on thu 21 jul 05
Wayne wrote: "The credit card companies do NOT want you to pay the balance
month. They make no money that way, and will be reluctant to give
you any more credit, since they aren't making anything on your using
it (their money). Your credit scores will also reflect this, and
show you as having poor credit (for paying everything each month, go
They are actually tickled to have you pay your balance every month. I always
have and as a result, get numerous offers for cards.
They really make their money from the merchant fees we pay at the time of
Here's an example:
We buy everything we can on our airmiles card. At $2000 per month, the
creditcard company gets 3% of each transaction or $60 and the $2000 from me.
They advance that sum to the next month when I again pay them in full and
they make another $60. For their original $2000 they make $60 x 12 (months)
= $720 in merchant fees. $720/$2000 = 36% annual return on investment, more
than twice the rate for the balance carrying spenders.
How would you like that kind of return on a $2000 investment.
In contrast, if I simply make the minimum payment while continuing to charge
on the card, in one year I will owe them about $24000 when I max out my card
so even if they from that point on get 18% interest, they have $24000 tied
up instead of the mere $2000. Multiply that by thousands of people all
paying minimum balances and you can see they need a lot of money to survive
and continue in business.
They also risk default if the person cannot pay.
Pay in full is the way to go when you can do it.
2729 Clearwater Ave
Lewiston, Idaho 83501