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I feel like folks like us, that never miss a payment, and max out our rewards, are net-losses for most credit card issuers. It's not clear why they don't just fire us as customers.
> "A much smaller portion of interchange goes to the credit card processor, to the acquiring bank, and to the credit card network" That's technically not accurate. Credit card networks do not earn money from interchange [1]. [1] "Visa does not make money from individual transactions." https://revenuesandprofits.com/how-visa-makes-money-understa...
I feel like folks like us, that never miss a payment, and max out our rewards, are net-losses for most credit card issuers. It's not clear why they don't just fire us as customers.
I feel like folks like us, that never miss a payment, and max out our rewards, are net-losses for most credit card issuers. It's not clear why they don't just fire us as customers.
So credit card issuers are pretty sophisticated with regards to this, and many of them track different user personas and use them to dice up their portfolio by archetypes. The "folks like us" archetype is one which is definitely tracked and goes by different names at different places. I express no strong opinion on whether you personally are contribution margin negative for your issuer. On a portfolio level though, t…
I feel like that user is typically the sort who enjoys telling anyone who will listen about how they managed to get great rewards from their card. With all that free marketing, the credit card issuer is probably happy to have them as a customer, even if they lose a little bit of money on them.
I'm happy to answer any questions or take suggestions for future issues if you have them, HN. Repeating something I've said before: this is the 3rd issue of a weekly newsletter, and its going to come out on every Friday for the foreseeable future. As someone who has spent more than 10 years here, I'm keenly sensitive to HN's desire to not have the front page be as predictable as my new shipping cadence. I'd appreciat…
Separately, is the "credit score" system a particularly American concept? In the UK the credit report companies will give you a number, but it seems to be something they make up to fill a consumer demand rather than something card issuers actually use. Do you know how the FICO score became such a central thing in US consumer credit, and does Japan work differently?
I feel like folks like us, that never miss a payment, and max out our rewards, are net-losses for most credit card issuers. It's not clear why they don't just fire us as customers.
How do you square that with card issuers that require you to pay in full each month, like American Express?
Only a handful of their cards - the Green/Gold/Platinum - are charge cards, and they all now have "Pay Over Time" (allowing a month-to-month balance on charges over $100) and "Plan It" (allowing one or more charges to be put on a 3-24 month payment plan with a fixed finance fee).
https://www.americanexpress.com/en-us/benefits/payment-flexi...
https://www.americanexpress.com/us/credit-cards/features-ben...
I feel like folks like us, that never miss a payment, and max out our rewards, are net-losses for most credit card issuers. It's not clear why they don't just fire us as customers.
My understanding is that merchants are charged around 3% of all that you purchase in interchange/surcharge while you get only like 1% back in reward.
Earlier quoted context omitted.
So credit card issuers are pretty sophisticated with regards to this, and many of them track different user personas and use them to dice up their portfolio by archetypes. The "folks like us" archetype is one which is definitely tracked and goes by different names at different places. I express no strong opinion on whether you personally are contribution margin negative for your issuer. On a portfolio level though, t…
> It is possible, given the design of individual products, that a user with close-to-optimal spending decisions is contribution margin negative on individual products and potentially on all accounts I feel like that user is typically the sort who enjoys telling anyone who will listen about how they managed to get great rewards from their card. With all that free marketing, the credit card issuer is probably happy to…
It is a curious, curious belief in the engineering community that we are better at trivial math than banks are. That is not a bet I would encourage people to make.
> "A much smaller portion of interchange goes to the credit card processor, to the acquiring bank, and to the credit card network" That's technically not accurate. Credit card networks do not earn money from interchange [1]. [1] "Visa does not make money from individual transactions." https://revenuesandprofits.com/how-visa-makes-money-understa...
Which is effectively the same thing.