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why should banks encourage people to apply for credit cards?
The benefits that credit cards bring to banks can be divided into two aspects:
One is explicit benefits, and the other is implicit benefits. Just like you give a class to students in New Oriental, the obvious benefit is that Yu Minhong will give you 5 yuan salary, which is superficial; The hidden benefit is that you have exercised your eloquence, made more friends and improved your English, which is behind it. The same is true of the significance of credit cards to banks.
Explicit income-reflected in the direct profit obtained by banks through credit cards, mainly including: interest income, annual fee income, merchant rebate income, cash withdrawal fee, punitive fee and some value-added service income.
interest income: simply speaking, it is the interest paid by overdraft using the credit line, which is the main part of credit card income. You must know that there are two options for credit card repayment, one is full repayment, and the other is minimum repayment. If you choose minimum repayment, the bank will charge high interest for the remaining unpaid part.
Annual fee income: The literal meaning is easy to understand, that is, if you use my card, I will charge you a certain fee every year. Annual fee income was a high proportion of fixed income source before 25, which once reached about 55% of credit card income. However, after 25, with the intensification of competition, various banks began to introduce annual fee-free services in the first year or by swiping their cards several times a year, which made the proportion of annual fee income decrease year by year.
credit card rebate income: when customers buy things and spend money by credit card, merchants have to give a certain percentage of the transaction amount to the bank, which is also the main part of credit card income. This part of the rebate is usually shared by the issuing bank, UnionPay and the acquiring bank, which has been at the level of about 7:1:2 for a long time. Nowadays, due to the fierce competition among banks, the bargaining power of merchants has been significantly improved, resulting in a significant decline in the commission rate.
Cash withdrawal income and punitive income: the former refers to the handling fee paid for cash withdrawal at the counter or ATM, which stems from the purpose of promoting credit card consumption and preventing risks by banks; The latter refers to the fine paid by the credit card for overdraft, which is to make up for the risk loss brought to the bank by the cardholder's default. These two parts account for a relatively small proportion of credit card income.
income from other value-added services: for example, the fees paid by cardholders to purchase goods by installment, which is actually similar to the intermediate business of interest income, but it is conducive to expanding consumption and controlling risks.
hidden income-mainly refers to the additional income brought by credit card business to banks, including locking accounts and funds, and promoting other public and private businesses in coordination.
lock accounts and funds: this is the most important hidden income. For example, if a merchant uses a bank credit card to purchase goods, and installs a POS machine of the bank to collect money for customers, and at the same time opens value-added services such as ordinary merchant installment (customers can pay by installment directly) and integral consumption, then the business process of the merchant will also be the process of bank expanding accounts and collecting funds.