A big analysis of how credit card banks make profits and their income sources!

Nowadays, many credit card customers are curious about a question, that is, how do banks make profits? Because many customers repay their loans on time, do not apply for installments, and basically do not charge any fees to the bank, then credit card How do banks make profits? Let’s take a look below.

How to make money with a credit card

1. Charge an annual fee: The most basic thing is to charge an annual fee. The higher the credit card level, the more expensive the annual fee. For example, high-end cards such as platinum cards and above have annual fees of thousands or even tens of thousands per card, and they cannot enjoy annual fee discounts.

2. Interest and handling fees: It is one of the biggest sources of money for banks. In the case of overdue credit cards, installments, minimum repayments, etc., banks will charge interest and handling fees. The rate is generally RMB 10,000. Five out of five.

3. Merchant commission: When customers swipe their cards to make purchases, merchants need to pay a certain proportion of the transaction amount to the bank, which is also the main component of credit card revenue.

How do banks make money through credit cards?

The four major profit methods of banks:

1. Commission

You may not believe it, but the commission collected by banks from merchants is its largest and most stable means of profit.

When customers make purchases at merchants and swipe their cards through POS machines, the bank will receive a commission of about 1% to 3% of the transaction amount. This amount is not small anymore, and many small merchants often refuse to let customers use POS machines in order to avoid paying this fee.

2. Annual fee

Nowadays, most of our domestic credit card annual fees are within 300 yuan, and they can be reduced as long as the conditions are met. But there are also some high-end credit cards with annual fees as high as 3,600 yuan or more because they provide special high-end services, and the conditions for their annual fee exemption are also very strict. However, for the wealthy, the services provided by these credit cards far exceed the annual fee of several thousand yuan, so they will not be stingy about paying.

3. Handling fee

This handling fee is mainly for cash withdrawals. The bank's handling fee for domestic credit card cash withdrawals in my country is 0.5% of the cash withdrawal amount, with a minimum of 2 yuan and a maximum of 50 yuan; overseas (including Hong Kong, Macao and Taiwan), the handling fee is calculated as 3% of the amount of each cash advance, with the minimum fee It’s ￥30 yuan or $3 USD per transaction.

If you deposit your own money into a credit card and then withdraw cash, you will also have to pay this fee. If there is no balance in your credit card and you withdraw cash overdraft, in addition to paying the handling fee, you will also need to pay 0.05%/day interest.

4. Interest

Because credit cards have entered the homes of ordinary people today, the repayment ability of ordinary customers is not as good as that of the rich, so it is inevitable that the credit card cannot be paid off in full on the repayment date. Condition. In response to this phenomenon, banks have set minimum repayment amounts, and set interest and late fees for non-repayment. This gives customers a sufficient breathing period while also increasing their own revenue.

After careful calculation, you will find that the unique "interest compounding" model of credit cards makes their interest rates no less than. However, last year, the country abolished late payment fees on credit cards and replaced them with liquidated damages, which alleviated this to a certain extent. There is pressure from repayers, but even so, the interest on credit cards is still very staggering.

How do banks make money by paying off credit cards on time? Analysis of bank profit methods

Failure to repay on time after using a credit card will result in high penalty interest and liquidated damages, which are one of the sources of bank profits. And if cardholders can repay their loans on time and the bank does not receive penalty interest or liquidated damages, then how can they make money? Today, let’s analyze how banks make money.

How do banks make money by paying off credit cards on time?

In fact, as long as everyone’s credit cards are not canceled, banks can make money through various channels.

1. The most basic thing is to charge an annual fee. The higher the credit card level, the more expensive the annual fee. For example, for platinum cards and above high-end cards, each card has an annual fee of thousands or even tens of thousands, and you cannot enjoy the annual fee. The fee discount is; for ordinary credit cards, such as the Gold Card, the annual fee for each card is tens to hundreds. Although the annual fee can be reduced by swiping the card, the bank can still make money, which is the card swiping fee.

2. The second is the card processing fee, which is one of the biggest sources of money for banks, but this fee is usually borne by the merchant.

The standard rate for card swiping at POS machines is the cloud flash payment rate. The fee is deducted from the merchant's payment amount and distributed to the card issuer, acquirer and UnionPay respectively according to the ratio of 7:2:1 or 8:1:1.

3. There is also an installment fee. For example, many cardholders who cannot repay in one go will apply for bill installments, and the expected annual interest rate is around 18%; some cardholders who are short of money will Handling cash installments, the rate for each installment is about 10%, which is also one of the ways for banks to make money.

4. In addition to the interest accrued by credit cards, no penalty interest will be charged if you repay on time, but interest will still accrue depending on the card usage or repayment method. For example, when withdrawing cash with a credit card, in addition to a 1% to 2% handling fee, interest will also be calculated at a daily interest rate of 0.05%. In addition, after the minimum repayment of the credit card, interest will also be charged on a daily basis, and the rate is also 0.01%. five.

The above is the relevant introduction to "How do banks make money by paying off credit cards on time?" I hope it will be helpful to everyone. In short, even if the credit card is repaid on time, the bank has many ways to make money. You don't have to worry about the bank not making any profit.

That’s it for the introduction of how banks earn money from credit cards.