Originally Posted by
suspire
Uh, by your logic, there would be no reason for Chase to have rewards cards, because they only take losses on them and only want clients on no rewards cards that carry balances.
First, let me just say that this is just a friendly discussion. I can't quite tell whether you really are getting agitated or it is the impersonal nature of an online forum that's causing some of your posts to sound that way, but I am not trying to get into a fight here.
As for credit card issuers, I think that they do only want profitable customers, such as those who don't take advantage of rewards and carry balances. The issue for them is that such a business model is unsustainable and is self-limiting, as it's very difficult to only target those customers. Further, even if a person does not currently fit into the "profitable customer" model, if he/she is not too unprofitable it still makes sense to maintain a relationship with him/her, since things change and a customer who isn't profitable today may end up being very profitable tomorrow, at which point it may be more difficult and more expensive to get that person away from the competition. Also, banks have very diverse financial offerings, so a bank that keeps a customer happy with its credit cards has a better chance of getting that customer to get a mortgage or a personal loan from that bank, etc... This is how the entire financial services industry works.
However, it seems clear they do want other types of customers, even if it means giving them rewards (that's the trade off for Chase--they are lower risk customers for Chase, though they may bring in smaller profits) and even if they pay off their monthly balance each month (which is the category I fall into). Or...Chase would have a whole lot less customers.
I agree and I think that we are saying more or less the same thing here. The issue here is that if you use your CC's in a way that maximizes their rewards, you aren't profitable.
I, for instance, use the credit card that pays 5% cashback on gas purchases exclusively for gas purchases and nothing else, while I use another credit card that pays out 2%-2.5% cashback on everyday purchases, another credit card when I need to maximize mileage rewards, etc... This is certainly not the way CC issuers hope that you do things, which is the reason that the issuers' and the customers' financial interests are not aligned. From what I've read, Chase is currently having a fit over unprofitable customers and has shut down some CC's for as little as $1,000 in cashback.