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 1-3 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.

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 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 Yunshan 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 apply for it. Cash installments, with interest rates for each installment, are also one of the ways banks make money.

4. In addition to the interest accrued by credit cards, penalty interest will not be charged if you repay on time, but interest will still accrue depending on the card use method or repayment method. For example, when withdrawing cash with a credit card, in addition to charging a handling fee of 1 to 2, 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 0.5%.

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.

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

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 swipe a card at a merchant to make a purchase, the merchant has to pay a certain proportion of the transaction amount (around 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 issuing bank 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 interest is calculated on a daily basis. Compound interest 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 credit card issuer charging an average of 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 cards that are 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 third quarter, 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 base for credit card installment repayment. Each installment has a handling fee of 1. If divided into 6 installments on average, the entire income will be : 14.69 trillion × 45.03 × 10 × 1 × 6 = 39.689 billion yuan.

This ends the introduction on how banks make money from credit cards and how banks make money on credit cards. Have you found the information you need?