You are here: DIME Home > Finance > How Do Credit Card Companies Make Their Money?


How Do Credit Card Companies Make Their Money?

We’ve all received offers, often quite persistent, to sign up for a new credit card. Credit cards themselves are great, because you can get the things you need even without cash readily available.

Author: SA Perillo
Date: May 26, 2011 - 8:26:22 AM


Printer FriendlyPrinter friendly page

We've all received offers, often quite persistent, to sign up for a new credit card. Credit cards themselves are great, because you can get the things you need even without cash readily available. However, don't you ever wonder how many credit card companies are out there? Because of the growing market for credit card users, it seems that every day, you get a solicitation letter for a new credit card company. The large playing field results in a lot of competition for credit card companies.

Creditors mainly get their income from the interest and fees on credit cards. Technically, you pay the interest as a fee for using the credit or the revolving balance on your credit card. Since you use the creditors' money to pay your bills, you have to pay them for the service as well.

The most common mistake most credit holders make is to assume their interest will stay the same for years to come. The interest is greatly affected by your credit score, which can hike up or lower the interest. Creditors are alarmed when they see a cardholder with a low credit score, so they need something to ensure that the person will pay off his/her debts. This is the reason why they hike up interest rates.

Fees are something most credit card holders will have to deal with. Almost everything that breaches the contract will require a fee. Late payments and overspending (going over the credit limit) both require fees. Some creditors even have hidden fees, which you won't know about unless you've read the fine print. Also, most credit card holders seem to forget that an annual membership fee will be paid for many cards, at the end of the year.

Late payment fees and fees for going over the credit limit can be priced anywhere from twenty to forty dollars. Don't underestimate the power of a couple of bucks, though. This is where creditors get the majority of their income. Annually, creditors collect roughly about fifteen million dollars worth of late payments and over-the-limit fees.

Fees are one of the reasons why many people get into debt with their credit cards. Sometimes, paying the minimum payment isn't enough to lower your balance. In fact, even if you pay the minimum amount, you might find yourself with a debt that is increasingly larger, because of well-placed fees and other charges. Even if they're not using their credit cards to buy anymore, the debt will still go up because they are unable to settle their accounts.

Always remember that credit card companies aim to make money. They are businesses just like any other, so they will try to make money any way they legally can. The best thing you can do to protect yourself from these predators is to be informed. Never sign up for a credit card when you haven't read the fine print, and always keep your finances in check to ensure that you don't fall into debt.



Adelyn is a writer who covers personal finance topics such as saving money and the best credit cards, review the best credit cards offer, offer that you can apply online.



View all articles by SA Perillo

Link to this article:

Code to copy: <a href="http://www.dime-co.com/finance/How-Do-Credit-Card-Companies-Make-Their-Money.shtml">How Do Credit Card Companies Make Their Money?</a>




Related Articles...

College Account or Retirement Account Which Money To Spend?

Jun 27, 2011 - 6:08:52 PM

It can be very hard at times to figure out which money to use for paying your student's college bills. Some use their retirement balances which get favorable tax treatment, while other people use their special college account funds.... [Read the full story]

How Do Credit Card Companies Make Their Money?

May 26, 2011 - 8:26:22 AM

We've all received offers, often quite persistent, to sign up for a new credit card. Credit cards themselves are great, because you can get the things you need even without cash readily available. However, don't you ever wonder how many credit card companies are out there? Because of the growing market for credit card users, it seems that every day, you get a solicitation letter for a new credit card company. The large playing field results in a lot of competition for credit card companies.... [Read the full story]

3 Quick Ways To Save Money

May 23, 2011 - 3:03:57 PM

There are hundreds of easy ways to begin cutting your expenses and saving more money each month. Some are as simple as cutting down on impulsive shopping sprees and entertainment, while others involve a little creativity. If clipping coupons is the only thing that comes to mind when you think about ways to save, read on!... [Read the full story]

Mortgage Assistance In Canada - The Right Help

May 3, 2011 - 10:01:27 PM

Most people take out mortgages to purchase a home. These mortgages are generally paid on a monthly basis. But, for some people getting the right mortgage plan may be difficult due to lack of proper information and for some due to lack for credit history. The government provides mortgage assistance in Canada so that the citizens can overcome the difficulty in taking out a mortgage.... [Read the full story]


Newest Articles in Popular Topics:

Business & Marketing Computers & the Internet Entertainment Health & Fitness
Finding Ways To Save Money And Maximize Revenue In Business
Cooper's Golf Park Tees Off Their New Website
Fiinovation Adjudged CSR Team of the Year & Caring Company at World CSR Day
Reasons Why Kale Realty is the Best Real Estate Firm in All of Chicago
Montreal Tech Startup Kangaroo Rewards Launches Mobile Loyalty Program for Local Merchants
It is time we break out of the SEO Shelter
3 Strong Reasons You Should Start Your Own Blog
Evolve Your Career With CompTIA A+ Certification Exam
High speed VMware Backups - Powered by UltraBlaze() from Vembu
Things to Consider When Selecting a Domain Name for Your Website
Fling Boom "Launches" This Holiday Season
Beautiful Abstract Canvas Art is Up for Grabs
Buying Art as a Gift: Tips From an Expert
Complete Guide to the 2014 Gatlinburg Fine Arts Festival Released by Jackson Mountain Homes
Learn Blues Music Online-Alternative to Traditional Piano Lessons
Causes and Treatment of Acne
What Type Of Constipation Home Remedies Are There?
Manual Wheelchairs: Buying One
Instant Facelift with Dental Implants
Lasik Surgery Leading Correction Of Vision Issues

Home & Family

Shopping

Sports

Travel
Enhance Your Learning Experience Through Best Responsive Elearning Development Tools
Best Apps for Learning German
Esvees is Cranbourne's Elite Hair Dressing Company
Ozone Generator
Practical Tips When Choosing Gates and Gate Openers for Your Home or Business
Why Cases are Required for Mobile Phones?
Are Dealership Services Worth It?
2015 Jeep Grand Cherokee Named Must-Shop SUV for Towing from AutoTrader.com
Online Selling With An Appraisal Advantage
Macsome AudioBook Converter released New Version V2.0.4
Aditi Ashok signs off with a double
Softball Coaching: Avoid Becoming A Nattering Nabob of Negativity
Softball Coaching Tips - The Funnel Approach
Pick Up Specialized Advice on Jumping Exercises Which Are Highly Effective
Vertical Jump Training Tactics to Increase Your Athletic Performance
Tips for Choosing the Right Paris Short Lets
Hostels - the best choice for working womens and college students
Perfect holiday? Book a cruise and sail in Croatia!
Say Aloha to Your Best Vacation Ever with Kohala Coast Properties
The Perfect Guide for a Fantastic Family Trip to Kansas City

 



Follow & Share Your Favorite Video Articles

Tell a Friend About This Site



Chamber of Commerce - on the Web logo



Subscribe to the eMarket SmartsTM Newsletter in order to keep up to date with what's happening with dime-co.com, get the emails on new video articles, featured articles, and more. Your privacy is always protected. We never rent, sell or trade your private information

:
:

Service provided by GetResponse Autoresponders


Recommended Associates


Latest Articles in All Categories


Putting Up a Small Commercial Printing Business
So You Might Be Unemployed And Desire To Become A San Francisco Real Estate Investor Now
Meditation and Mindfulness: Dealing With Emotion
CPA Websites: Five Essential Ideas for Composing Convincing Articles
Set Goals In Order to Come Up With Your Action Plan
Is the Air in Your Home Safe to Breathe?
Coarse Fishing Tackle Review: The JW Young 13ft Trotter Rod
Section 1031 Exchanges For San Diego Real Estate Investors
Phoenix Real Estate Investing For Highest Possible Earnings
Legendary are the Volk Racing TE37 Wheels
Developing the Next Generation Wall Station (ChaseDesk™) for Healthcare - A Case Study
What are step down transformers?
Introducing Sharehype, the Revolutionary Tool for Online Marketers
Rewards To Shopping For Austin Real Estate On The Web
Hydroponics for Beginners



Do you write?

Would you like submit your articles and have them approved on a priority status? Find out more about how you can become a Priority author for pennies a day! Click here.

Dime-co.com Home
  • Business (9328)
  • Computers & The Internet (5740)
  • Entertainment (1348)
  • Family (958)
  • Finance (1963)
  • Health (4246)
  • Home and Living (6670)
  • Marketing (6113)
  • Shopping & Product Reviews (2624)
  • Sports (694)
  • Travel and Vacations (1689)
  • Video Articles (1)
  • Editors Pick (1)