Credit card company rejects customers with too-good credit scores | Hacker News Reader

Credit card company rejects customers with too-good credit scores

startribune.com

37 pointspetewarden29 comments

My wife has incredible credit and pays her full bill every month. A few months ago her full payment was received 1 day after the due date, so she got pinged $15 for not paying the minimum. When she called to see if they would reverse the charge, the customer service rep rudely told her no and wouldn't budge. When my wife threatened to cancel the card, the rep happily obliged. She tearfully asked me why they would be so unforgiving to her after all her diligent payments. The truth is that by being one of their most responsible customers she became one of their least valuable customers. Very irritating.

I hate to sound as callous as the call-center rep, but 'tearfully'? Is this hyperbole?

How would you feel if a credit card you used routinely and, likely, had a very high limit was cancelled by someone calling your bluff? As far as crying, some people are more prone to crying when they are upset than others.

> How would you feel if a credit card you used routinely and, likely, had a very high limit was cancelled by someone calling your bluff?

I'm not emotionally attached to any of my credit cards.

High limit cards aren't hard to come by. Cancel one and I'll use another.

If you are not prepared to have someone call it, then you are an out-and-out idiot to bluff in the first place.

Sounds like a rude customer service rep, not necessarily corporate policy. From all I've heard (including the OP article), most banks strongly prefer credit-worthy customers, because it's easier money. Amex, for example, makes 70% of its money off merchant fees.

I agree, I've never had a problem getting charges like this removed if you just call and ask.

Not all Cardholder issuing banks are also Merchant issuing banks. And when they are often times the Card issuing side is a separate division/department and their bonuses, etc. are based on their division's/department's profitability.

My wife was moving money around and overdrew about a month ago... She didn't really like Chase to begin with so she walked into the branch and just said "I want to close all three of my accounts right now" and they ended up removing the charges -- not sure if being there in person helps, but I would guess it takes more work for a rep to close an account than to issue a refund -- not to mention they would have to endure "the look" during the entire process.

Never allow a rude CSR cancel your account. Tell them you want to cancel and ask for a supervisor, retention department or anyone else.

Be as polite as you possibly can to the next person and let them know how rude the last person was and what you wanted them to do. Usually works if the request and person are reasonable.

Don't give them a chance to call your bluff.

Mid-tier universities do this all the time too by rejecting students they know won't matriculate (or will matriculate and transfer in 2 years).

Known as "yield protection" or "Tufts syndrome" ( http://en.wikipedia.org/wiki/Yield_protection )

I understand how credit card companies would prefer people who rack up fees and interest. What I do not understand is why one of these companies would get in bed with a retail operation to offer a store card.

Logically people who finance items at a store like Gander Mountain are going to be a cross-section of American society. Not all of them will fit any one, perfect profile, not all will be particularly good or poor credit risks. Nevertheless, the store is going to want its credit partner to extend credit to as many of them as possible.

Conflict is inevitable if one party goes into the deal with the wrong idea.

Am I accurate that the CC industry calls those who pay their bills off in full each month, "deadbeats"?

I've heard that as well.

http://credit.about.com/od/usingcreditcards/a/deadbeatcredit...

Good customers are the ones who pay the minimum

Yeah, gotta let them make some money off you.

They make money off of the discount rate, regardless of whether they make money off of your interest. Some credit card companies have become addicted to the much more lucrative trough of penalty fees and interest payments, but they make money regardless.

"They make money off of the discount rate"

Could you elaborate on that?

For every credit card transaction the processor charges a discount rate, which is usually around 1 to 3% (depending on the particular type of transaction, how it's processed, and the merchant) which comes out of the credit card charge before it gets deposited to the merchant's bank account. The issuing bank and the processor (Visa, MC, etc.) split the revenue from the discount rate with the lion's share going to the issuing bank (this is called the interchange fee).

For example, if you spend $500 a month with your credit card but you pay every balance before it has a chance to collect interest then the issuing bank will still make something like $100 a year off of your purchases (give or take). This obviously pales in comparison to the 10x more revenue they could make if you never paid down your balance and racked up lots of interest, but it's not exactly nothing.

Also worth remembering is that high balances and high interest payments are higher risk (if we'd forgotten this from the recent/ongoing financial crises).

Yes but if I pay off the card every month then the bank is eating the cost of providing the credit. For example if I spend $500 over the month, by the time I get the statement and pay it by the due date I've probably had the use of the money - interest free - for lets say an average of 22 days. Additionally banks have to absorb the risk of deadbeat cardholders, etc. The card issuing bank also hast to pay visa/mastercard a fee every year. and finally the bank has to pays the company they outsource processing to (Total Systems/First Data/etc.). So the cost to the card issuing bank to provide credit is substantially greater than zero. In fact, if they are only making $100 in interchange fees they are probably losing money.

Also, I'm pretty sure the merchant bank gets a significant portion of the fee.

If you borrow 1000$ a month every month and pay it off they get fees. Each 1/2% in transaction fees works out to (12 * .5% * 1000) = 60$ / year aka the equivalent of ~6% in interest.

But, cards that offer cash back can eliminate this. So they only make money off of interest and late fees.

Yeah but in this case the credit card company pays a $37 referal bonus, which makes it unprofitable especially if the card isnt used very often.

Quite so. But it kind of gives the game away in terms of predatory lending eh?

Companies have the right to pick whoever they want to lend money to, for any reason except legally rejected ones.

Part of the unexpected side effects of credit card reform is that when you reduce the profits of certain classes of customers, this causes the companies to not be able to carry the less profitable loss leaders, so companies start cherry picking the best customers.

It's like how 80-90% of a banks customers make it no money at all. They are all loss leaders. They make their money on a very small percentage of the customers.

Do responsible customers actually cost the credit card companies money or do they just not bring in any revenue to speak of?

They are borrowing money each month, without paying interest on it, so it does cost the credit card companies money.

Losing money in its time-value. Gotcha.

Edit: I thought they still made money off of the vendor fees though?

They do yes. Between 0.5% and 3%.

It costs them some money to process an account though, send bills, handle payments etc. If someone is charging reasonably frequently then they are still profitable.

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