Credit Card: Income Revenue For Issuer

   

I still remember when I first got my credit card. There is a feel of proud, importance and excitement that now I can just swipe the card to pay anything. And I also still remember how careful I was for filling the application form just as careful when I did the high school diploma test. I guess at any different level all of us will feel pretty much the same, we are all feel that the credit card issuer is the one taking control of your destiny of whether or not we will got the credit card. We are all maybe don’t realize that the one more eager for us to apply is the credit card issuer. They made a handsome money for all our credit card use.

Meaning of Credit Card For You

Credit Card Money

Remember, you should never think a credit card as source of debt. If you have some big debt you really want to take, you should take a personal loan instead. It will save you huge interest rate during the term of your loan.

So, a credit card should only mean mostly convenience. With its interest free period you can buy items and pay it altogether at the end of the month. Also remember, you need to pay off your credit card every month.

I also endorse for you to select credit card with reward/loyalty program. With this you will have additional benefit with the points that can be converted to some good even cash back.

One other benefit that you could argue that you have purchasing power that can be used,  i.e: for emergency purposes that will give you peace of mind (although will cost a lot, but in emergency situation additional cost is a given).

But you don’t have really a financial advantage of owning a credit card. In fact you will have slight financial disadvantage when you apply for mortgage / homeloan: your credit card limit (yes, full credit card limit, not only the one you use) will be used to reduce your borrowing capacity. Be careful with this, don’t always raise your credit limit – just have enough to cover your expenses and emergency.

Meaning of Credit Card for Credit Card Issuer

For credit card issuer, every credit card that they issue, they will generate some good money, let see:

1. For credit card with interest free period, usually they will charge “membership fee“. Maybe $50 per year up to a few hundreds dollar per year for gold or platinum card. Do not get a credit card without “interest free period”. They might tell you it’s free for the first year, but they surely do charge this every year afterwards.
2. For every purchase you made, they will get a cut. Well, you won’t feel this money, but the seller will. The amount is not that big, usually around 2% heavily depended on the seller sales, but this is the reason why for some purchases with credit card, the seller threaten to charge you extra: to recover this transaction fee. For example, if you buy $250 vacuum cleaner, the credit card issuer will enjoy $5 from this purchase.
3. If you did not pay off the credit card by the time they are due every month, the credit card issuer will slug you with the notorious credit card interest rate. The rate is very high up to around 20% per year. So, that $250 vacuum cleaner, if you “forget” to pay it off, will attract additional $4 per month that you have to pay.
4. Even worse, the credit card issuer is actually “double dip”. They have charged you with membership above to have a credit card, but they also charge the seller “merchant facility fee” for them to be able to use your credit card for purchase in their store.

Conclusion

Next time you apply for your credit card, bear in mind that you will give them income and they are not the one giving you favor. Yes, you can get some convenience from a credit card but every single cent you spent you need to pay it back.

Although you still need to be truthful in filling your form, if there is something that you don’t want to reveal or some difficult question, just try to leave it blank. If it is really important they will call you to ask more detail. But the chance is they just don’t bother to check everything, they just want to give you a credit card that you can use (so they reap all the income from it)

Related Posts

• Increase Your Credit Limit on Your Credit Card, or not?
• Part 2 – Credit Card Balance Transfer: Your Own Calculation
• Credit Card Balance Transfer: Use It For Your Great Benefit
• Manage Your Only Credit Card: Don’t Fall Into Debt, Get Out If You There !
• Your Homeloan Also Depends On Your Credit Card!

Denis Kristanda  

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