Where does the bank’s income from credit cards come from?

The income from bank credit cards mainly comes from the following points: 1. Annual fee. After the credit card is opened, the bank will charge the cardholder an annual fee.

However, due to the fierce competition in the bank credit card market, most banks will have a policy of reducing or exempting annual fees for credit cards.

This encourages the use of credit card consumption, and the bank can charge other large profits.

2. Credit card swiping fees and merchant rebates

Every time we use a credit card to make a purchase, we need to pay a certain amount of handling fees, but most of this part of the money is borne by the merchant.

But this is only a small part. The rebate from card swiping is the real "treasure pot".

When we make a purchase with a card at a merchant, the merchant has to pay a certain proportion of the transaction amount (about 0.5~0.7%) to the bank. This money is mainly shared by the card issuer, UnionPay and the acquiring bank.

Among them, the credit card issuer will charge between 0.36% and 0.48%, and the specific bank will be different.

3. Interest

This is also the main source of bank credit card business income.

Everyone knows that you do not need to pay interest on credit card purchases after the full payment on the repayment date, otherwise you will be charged high interest, which is generally charged at 0.05%/day, and the interest is calculated on a daily basis. Compound interest is calculated monthly.

The longer the overdue period, the more money the bank makes.

4. Installment fee

When the cardholder fails to repay the bill in installments, he will need to pay a certain installment fee.

The installment handling fees of each bank are different, but basically the handling fee rate for each installment is around 1%. The more installments, the lower the handling fee rate.

Special attention: For many bank credit cards, after choosing installment, even if you repay in advance, you still have to pay the handling fee in full. Therefore, it is not cost-effective to repay in installments!

5. Other income

There are many hidden charges for bank credit cards, such as cash withdrawal fees, loss report fees, SMS function fees, etc.

So, how much money do banks make?

By estimating each item, we can roughly know how profitable bank credit cards are!

1. Merchant rebates for credit card purchases

Calculated based on the total bank card credit amount being 14.69 trillion, the credit utilization rate being 45.03%, and the average credit card issuer charging 0.40%.

As of the end of the third quarter of 2018, the revenue of this block was: 14.69 trillion × 45.03% × 0.40% = 26.459 billion yuan.

2. Interest income

The total amount of credit card overdue for six months is as high as 88.098 billion yuan. This part alone will generate 44.04 million yuan of interest income every day (daily interest rate 0.05%). In the first three quarters, there were 11.89 billion yuan.

Not to mention those that are only a few days or a month overdue, it is estimated that the bank can earn at least tens of billions in interest income every year!

3. Installment fee

We use 10% of the total credit usage as the basis for credit card installment repayment, with a handling fee of 1% for each installment. If divided into 6 installments on average, the entire Revenue is: 14.69 trillion × 45.03% × 10% × 1% × 6 = 39.689 billion yuan.

How do banks make money through credit cards?

Credit cards are a major type of card promoted by banks. Nowadays, a variety of credit card types are flooding the eyes of consumers, and our lives seem to be surrounded by countless credit cards.

Why do banks require so many credit cards every year? How do banks make money by issuing credit cards?

Income composition of credit card business:

1. Card issuance business, income includes: first-year annual fee, card production fee (reissue card), fast card issuance fee, and other card issuance income< /p>

2. Revolving credit business, income includes: consumption revolving interest, cash advance revolving interest, late payment fees

3. General consumption business, income includes: card issuing bank commission, cash advance procedures Fees

4. Account management services, income includes: annual fee for the following year, loss report fee, card replacement fee, etc.

5. Value-added business, income includes: merchant commission, cardholder procedures Fees

So, in general terms, the profit points of banks through credit cards can be summarized as:

1. Interest income. If you fail to repay the loan overdue, you will have to pay interest at an expected annualized interest rate of 5%, which is equivalent to one year. This expected annual interest rate is very high. However, it is estimated that as people become more and more aware of credit cards, it will become more and more difficult to collect this kind of interest.

2. Consumption fee income. After the cardholder makes a purchase in the mall, the bank charges commission income from the mall. Don’t underestimate the current ratio. This is the handling fee charged for each transaction, which is very considerable. In addition, handling fees are charged for credit card cash withdrawals, loss reports, emergency rescue and other services, which are also income.

3. Annual fee income. This annual fee is basically uncollectable now and will never be collected in the future.

Fee income, interest income, and annual fee income, the most basic and direct three of them come from the income of the credit card itself. Annual fee income is now collected even by ordinary debit cards

There is also indirect income: income from the use of funds. The money you deposit in the card is used by the bank for investments such as loans or buying treasury bonds. Through investment, the bank earns the difference between the loan interest and the deposit interest as its own Income, this is also the reason why many banks blindly issue cards regardless of costs or the number of valid cards.

Fee income and fund utilization income are the main channels for making money from credit cards.

How do banks Make money with a credit card?

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 from credit cards?

The main source of money for banks to make money from issuing credit cards is high interest rates. Once the user exceeds the interest-free repayment time, high interest will be charged, usually 0.05% per day.

The more common online platforms in China include: UnionPay Online, Kuaiqian, Shengpay, Alipay, Tenpay, etc. Depending on the platform and bank you choose, the charging standards and specific payment arrival time will be different.

This method mainly completes repayment through the "Lakala" smart payment terminal installed in convenience stores. It usually takes 2 to 3 working days to receive the payment. At the same time, repayment using this method is free of charge. A handling fee is charged.

Extended information

Improper storage of cards, improper handling (expired credit cards with invalid tapes are not destroyed, or lost cards are not immediately invalidated, etc.), and personal identity information is unintentionally stolen Or defraud. To avoid such problems, citizens should not easily provide personal identity information to others, and it is best not to entrust others to handle credit cards on their behalf.

The service staff overcharged the cardholder's credit card information during the purchase process, or stole his or her credit card information to make purchases at other merchants. This situation can happen whether it is a physical merchant or an online virtual merchant.