There are rumors floating around that credit card companies are in serious trouble. This is because as money from loans are all but dried up, many card holders are starting to run up their balances in times of economic stress.
If this is true, it is almost a certainty that card issuers will start trying to make even more ways to make money. That’s why it is extremely important for everyone to read every word from letters that the companies send us. Below, you will find at least 10 ways credit card companies currently make money. When those letters come, cross check the language they use and pay particular attention when languages seem to refer to any of the following. You never know what they might try next.
- Transaction Fees from Merchants – This is actually the traditional way that credit card companies make money. Every time a transaction happens, the credit card company charges the merchant that takes payment (usually a small percentage).
- Referral Fees through Partnership with Companies – Ever wonder why they let you shop online and get discounts if you go through their website? Credit card companies actually get a kick back.
- Annual Fees – Every card in the old days used to charge an annual fee, but thanks to competition, most cards have no more annual fees unless you are talking about those Gold or Platinum cards. In most cases, annual fees run from $80 – $120 but cards like the American Express Centurion Card can get up to $2,500 per year!
- Late Fees – Don’t be late on your payments! Not only can credit card companies wipe out all the reward points when you are late on payments, they can even reduce your grace period so that money is due as soon as it is charged. Furthermore, they can increase the interest rates as soon as it is charged so do not be late on your payments!
- Up Sell Services – Ever wonder why the person on the other line always asks whether you want to add services to your card? It’s because they make money off all of them. Credit monitor, fraud protection all fall under this category.
- Interest Charges – This is the biggest revenue generator for credit card companies these days. If you don’t pay it off every month, expect the interest to add up because even 25% APY is common these days.
- Currency Differences – Unfortunately, credit card companies make money off the currency exchange rates every time you make a purchase in another country. The different might be small, but they add up for you and for them!
- Foreign Purchase Charges – Not only do they make money off the exchange rate, they make you pay another one time fee every time you pay in foreign currency.
- Balance Transfer Fees – If you think that a lower interest rate might help you, make sure you do the calculations carefully because credit card companies often charge you to transfer balances.
- Cash Withdrawal Fees – Cash advances are great for the card issuers because they often charge you an extreme high rate for that convenience. Worst yet, interests are usually calculated as soon as the withdrawal happens!
With so many ways that card companies make money, it’s hard to imagine that they are still going to be in trouble. As for us, just be careful and make sure we don’t give our money away to them!
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{ 1 comment… read it below or add one }
Yeah, the credit card companies got if figured pretty good to their advantage. And I thought they just made money from interest (point 6). This all reminds me to get mine paid off ASAP!