

Credit card company rejects customers with too-good credit scores - petewarden
http://www.startribune.com/business/97125744.html?elr=KArksLckD8EQDUoaEyqyP4O:DW3ckUiD3aPc:_Yyc:aUnciaec8O7EyUsl

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marknutter
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.

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cynicalkane
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.

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camiller
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.

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slapshot
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).

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

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hapless
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.

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

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zimbu668
I've heard that as well.

[http://credit.about.com/od/usingcreditcards/a/deadbeatcredit...](http://credit.about.com/od/usingcreditcards/a/deadbeatcredit.htm)

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keytweetlouie
Good customers are the ones who pay the minimum

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fletchowns
Yeah, gotta let them make some money off you.

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InclinedPlane
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.

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seiwyn
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.

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

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ars
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.

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

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

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Aaronontheweb
Losing money in its time-value. Gotcha.

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

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ars
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.

