Credit Card

[jennyjoan]

If a person gets a credit card for a certain amount and it is nought interest paying it back and is paid on time - how does the "lender" make interest.

[237SJ]

The credit card companies make money by taking a percentage of every transaction. I`ve never paid a penny of interest in my life but my card company makes money every time I spend on it.

[jennyjoan]

that was the question 237 - how do they do it.

[jennyjoan]

I have never had a credit card in my life hence I don't know anything about them.

[Buenchico]

They don't.

It's a 'loss leader' to draw customers into using the card later on, when interest will be charged.

Even if a card doesn't offer a '0%' introductory deal, lenders can still end up making no money if the card holder pays back the full amount at the end of every month. It's for that reason that someone who always pays back the full amount, rather than paying over time, is likely to have a lower credit rating with many lenders. (i.e. other lenders will be less likely to offer a new card to someone who always pays in full each month,making them no profit, than to someone who always pays on time but not at the full amount).

[jennyjoan]

ok good to know Chris - thanks

[Old_Geezer]

Indicates what a farce it is. Good payer/low risk, lower rating than tardy payer/high risk. Computer says, "No".

[DocHH]

Each credit card company charges a fee to the vendor for using their credit card system, usually a percentage of each transaction. So they take money from the seller as well as the buyer, if the latter does not pay back in full each month. So they are speculating that at some time in the future the buyer will not pay in full each month if there is 0% rate period. Some credit card companies charge vendors a higher % than others, which is why not all credit cards are accepted by all vendors.

In addition if the credit card user buys something while abroad, the credit card company can also make money on currency exchange rates, using the buy/sell spread.

[DTCwordfan]

typically 2 to 3 percent, higher on Amex.....

[Peter Pedant]

the question is - how do they do it
the answer is - they charge the seller 2.5% on every transaction

so with 237SJ who is using it as a charge card - the bits of paper come in and he pays them off

and also the various sellers 237SJ has bought off will pay the credit card company £2.50 for every £100

that is how they do it

[Peter Pedant]

oh and dont draw money on your credit card
you pay interest for three months

[Flonska]

Cash advances in the UK using credit cards attract a higher rate of interest plus fees (typically 3% - min £3). Interest accrues from day one - there is no "interest free" period as with purchases. Similar transactions outside the UK may attract additional charges/fees. Interest may be charged on both the amount withdrawn/advanced, and the o/s balance at the time until the whole amount is repaid in full. If you pay for goods and services with cash drawn from your card account, you will lose the protection offered if you had used the card direct.