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

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 1-3 on 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 China 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 based on 3 of the cash advance amount, and the minimum charge is Pen is ￥30 yuan or $3 USD.

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 issuing credit cards?

The main profits are as follows:

1. Card swiping fees

Card swiping fees are also It’s called “card swiping commission” and is currently the most important source of profit for domestic banks’ credit card business.

When cardholders complete transactions by swiping their credit cards at merchants, the merchants have to pay a cost, which is the so-called card swiping fee.

According to the new credit card regulations, the unified card swiping fee charging standard for general merchants is about 0.6 of the card swiping amount, which is usually shared by the issuing bank, UnionPay and acquiring bank in a ratio of 7:1:2.

2. Interest income

Interest income is what we often call "penalty interest income" and is also an important source of profit for banks in the credit card business. When the cardholder fails to repay the loan on time, it is recorded as overdue, and the bank will charge interest.

3. Credit card installment fee income

Every holiday, in order to encourage cardholders to spend more, banks will vigorously promote their credit card installment business. Credit card installment may seem to relieve the pressure of debt repayment, but it actually adds a lot of costs to you.

4. Credit card liquidated damages

If you fail to pay even the minimum monthly payment, not only will you have to bear interest, but you will also be charged a "liquidated fine". The standard for charging liquidated damages is 5% of the unpaid portion of the minimum repayment amount. Each bank has set a minimum amount and a maximum amount. For example, banks such as Bank of Communications and China Merchants Bank charge a minimum of 10 yuan or 1 US dollar.

Bank cards refer to credit payment instruments issued to the public by approved commercial banks (including postal financial institutions) with all or part of the functions of consumer credit, transfer settlement, cash deposits and withdrawals, etc. Bank cards reduce the circulation of cash and checks, allowing banking business to break through the limitations of time and space and undergo fundamental changes. The application of the bank card automatic settlement system has made the dream of a "checkless, cashless society" a reality.

Classification method

Generally, bank cards are divided into credit cards and debit cards according to whether they grant the cardholder a credit limit. In addition, bank cards can also

be divided into magnetic stripe cards and chip cards according to different information carriers;

are divided into domestic cards and overseas cards according to whether the issuer is in the country;

It is divided into personal cards and corporate cards according to the issuing objects;

It is divided into RMB cards, foreign currency cards and dual-currency cards according to the account currency.

Debit card

Debit cards are divided into debit cards, special cards and stored-value cards according to different functions. Debit cards cannot be overdrawn. Debit cards have the functions of transferring money, depositing and withdrawing cash, and spending money. A special card is a debit card used in a specific area and for special purposes (referring to purposes other than department stores, restaurants, and entertainment industries). It has the functions of transferring funds, depositing and withdrawing cash. A stored-value card is a prepaid wallet-style debit card in which the bank transfers funds to the card for storage at the request of the cardholder and directly deducts funds from the card during transactions.

Debit card [debitcard] can be used for consumption online or at POS, or for transfer and withdrawal through ATM. Overdraft is not allowed, and interest is calculated on the amount in the card based on current deposits. Funds are withdrawn directly from the savings account when spending or withdrawing money. Debit cards generally require a password (PIN) when used. Debit cards can be divided into ordinary cards, gold cards and platinum cards according to their levels; they can be divided into domestic cards and international cards according to their scope of use.

Credit cards

Credit cards are divided into credit cards and quasi-credit cards. A credit card refers to a credit card in which the card-issuing bank gives the cardholder a certain credit limit, and the cardholder can consume within the credit limit first and repay later.

A quasi-credit card refers to a credit card in which the cardholder first deposits a certain amount of reserve fund as required by the bank. When the reserve fund is insufficient to pay, the cardholder can overdraw within the credit limit specified by the card-issuing bank.

Credit Card

Creditcard (Creditcard), often called a credit card, means that the issuing bank gives the cardholder a certain credit limit. The cardholder can use the credit card within the credit limit. A credit card that spends first and pays back later. It has the following features: consume first and repay later, enjoy an interest-free payment period (up to 56 days), and has a minimum repayment amount. Customers can repay in installments if they have overdrafts. Customers need to pay a certain amount of annual fees to the bank they apply for, which differs from bank to bank.

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

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 the bank any fees, 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 an annual fee 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 to use credit cards to make money

The methods of using credit cards to make money are as follows:

1. Participate in more activities of credit card banks. For example, you can earn enough money by spending at designated merchants. There are also activities such as discounts, discount coupons, and gifts for accumulated consumption.

2. Credit cards have a certain interest-free period. If you make a purchase one day after the bill date, you can enjoy up to 50 days of interest-free. You can make good use of this time to manage your finances and gain profits.

3. Use credit card points to redeem points. Credit cards generally have points after payment. Points can be exchanged for some airline miles, coupons, some platform memberships, commodities, etc.

For more information on how to use credit cards to make money, go to: View more content

This is the end of the introduction to how credit card banks make money.