credit cards

How valuable are you to credit card issuers?

While you need a good credit score to qualify for many credit cards, there are several other factors that will ultimately influence whether you'll be a financial firm's favorite customer. Just how valuable are you to credit card issuers? Take our quiz to find out if you're a credit card lender's favorite pet.

Do you use your credit card regularly?  © Robert Kneschke/Shutterstock.com
An issuer's first priority is securing active card users, says Eric Lindeen, director of marketing at Zoot Enterprises, since this ensures they won't lose money on the account. Simply using a card to pay for a Netflix subscription is "cruel to the issuer," Lindeen says, since that single monthly transaction won't cover the cost of issuing the card, sending out privacy notices and monthly statements. Most issuers consider people who use their card 20 to 30 times per month "a strong, successful customer," he adds.
Next Question Do you make more than $120,000 a year? © nito/Shutterstock.com
One of the big ways issuers make money off credit cards, especially with consumers revolving less credit card debt following the recession, is through the interchange fees merchants pay to accept the payment method. As such, "the most attractive (segment) is the high net worth individual," says Brian Riley, senior research director with CEB TowerGroup. "They tend to revolve less, but the spend kicks off interchange revenue." While each issuer may define "high net worth" differently, Riley says household income of about $120,000 per year is "the fuzzy cutoff" for this target demographic.
Next Question Do you pay off your balances in full? © photastic/Shutterstock.com
Issuers also make money off the interest cardholders pay on purchases, so customers who carry a balance are going to be preferable to those who pay off every monthly statement in full. "Even if the balance isn't huge, it can still be profitable," Lindeen says, given current interest rates.
Next Question Do you miss your monthly payments? © karen roach/Shutterstock.com
Issuers don't want cardholders who routinely miss their monthly payments. "If you're one of these people that rack up a lot of late fees and can't pay your bill on time, you're probably at high risk for default," says Beverly Harzog, author of "Confessions of a Credit Junkie: Everything You Need to Know to Avoid the Mistakes I Made."
Next Question Are you maxing out your credit card?  © Marie C Fields/Shutterstock.com
It's also a red flag if you are continually bumping up against your credit limit. "That looks like you're out of control," Harzog says. "(Issuers) don't want a high-risk person" who may default on the card. Defaulters will "become an expense item," Riley says. He estimates issuers make around $350 per customer each year. So if one person defaults with $1,000 in debt -- that single charge-off could wind up costing the company almost all of the profits from three other cardholders in good standing.
Next Question Do you have other financial products with your issuer? © JohnKwan/Shutterstock.com
"The theory that most bankers hold is that the more relationships you have with an institution, the more profitable you will be," Lindeen says. As such, cardholders who also have, for example, a checking account, mortgage, auto loan or possibly even another credit card with one issuer are likely to be considered more valuable than those who don't. While there are exceptions to this rule, Lindeen says financial firms typically aim for customers to have, on average, five products with their institution.
Next Question Is your credit score lower than 620?  © Michael D Brown/Shutterstock.com
Issuers value customers with near-perfect credit scores, even though they may not contribute heavily to a card's major revenue streams. "I'm going to look at selling them other credit products," Riley says. "I might make less money (on the card) intentionally to get them into the bank." To bolster profits, they'll also lend to customers with average credit who are more likely to carry a balance and won't qualify for their best annual percentage rates. However, "once your FICO score is below a 620, you get credit-impaired," Riley says, since you'll be viewed as more of a liability to their books.
Next Question Do you let rewards expire? © Aquir/Shutterstock.com
Issuers generally factor the cost of rewards into any program they offer. They also charge annual fees on rewards cards to mitigate expenses. And since rewards programs are a great way to get customers to use a card frequently, issuers probably aren't losing a ton of money on people who redeem points or miles regularly, Harzog says. They certainly aren't going to mind, however, if you let your points expire.  "Credit card issuers come out way ahead on those customers," she says.
Next Question Do you call customer service regularly? © file404/Shutterstock.com
Customers lose brownie points with issuers when they frequently initiate "expensive interactions," Lindeen says, such as calling up their customer service center. When a call center employee talks to a cardholder, the issuer could wind up paying "$10 to $15, even if it's for 30 to 40 seconds," he explains. This is why many issuers provide automated services, like immediate balance inquiries, when you call the toll-free number on the back of your card.
Next Question Do you receive paper statements? © jason cox/Shutterstock.com
Similarly, an issuer is likely to value a cardholder who has signed up for electronic statements over a cardholder who prefers the old-fashioned paper ones. "The incremental cost of an electronic statement is fairly small," Lindeen says. "But printing and mailing a paper statement is probably a couple bucks per statement."

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Balance Transfer Cards 15.80% --0.00 15.80%
Cash Back Cards 16.42% --0.00 16.42%
Low Interest Cards 11.09% --0.00 11.09%
 
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