Re: I think I finally get it!!

Posted by JKelly (151.197.123.138) on June 10, 2004 at 23:32:04:

In Reply to: Re: I think I finally get it!! posted by bg on June 10, 2004 at 22:30:26:

True enough, but the credit card company is charging interest. If the consumer charges 10.00, the credit card adds interest and the consumer is billed for the 10.00 plus interest. The merchant also gives the credit card company a percentage of the sale. So the consumer is charged 10.00 plus interest, and the store is paid not the 10.00, but rather 10.00 MINUS 3% or so. So, the credit card has made money from both the consumer and the merchant. But, correct me if I am wrong......when they charge off, the charge off the 10.00 plus the interest that they have added. So, within the tens of thousands of credit card transactions that take place every day, the credit card company makes money. Now you may be an accounting major, and maybe I am wrong. But that is the way I see it. The credit card companys make money, even with the charge offs. If credit card companies were loosing money, they would not be in business. They would not be on college campuses, they would not be sending pre-approved credit cards to everybody and his brother. I never applied for even one of my 13 cards. The bank cards came to me in the mail, pre approved. WHY because I married a man with money!! Yep, and as soon as I had bank accounts with my name on them, the credit card offers started to appear in my mail box. When I walked into a dept. store, and this is still happening, I am asked over and over if I want to open a store account (they tell me I will get 10% off of my purchase-they don't tell me how much interest they are going to charge me, not only for that purchase but for every purchase thereafter) Yes, I know, I have the option of paying them off before they add interest, but they know the human condition.They've spent a lot of money studying the human condition and psychology. They know what the odds are. They will get their interest, and the consumer will buy more if he/she is using a credit card. I NOW and for many years go to the mall with cash, and when that cash is gone, I leave the mall. You seem to know something about accounting, I thought you might be a CA, (but you're too smart) I know about psychology though. As I said, I am not an account, but and I don't know what percentage the credit card company actually pays to the IRS (if any,after deductions)but I would bet my house that they don't actually loose on the deal. I remember when the airlines projected their gains and if they did not meet that projected income gain, they considered it a loss. I just remember that from the days of Eastern and Pan Am. Yep, the real Pan Am. Certificate #1 that went belly up some years ago. And, yes I have heard the argument the credit card companies raise interest rates because of the people that don't pay their bills. BULL......just don't believe that one either. If they weren't making money, they wouldn't be in business. The losses are factured in, don't have to be an accunting major to know that much.

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