Are unprofitable customers "creditworthy"?

Old Nov 29, 18, 5:13 pm
  #1  
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Are unprofitable customers "creditworthy"?

If I ran a "co" in one of Chase's co-branded cards, I'd tell Chase to issue my card to every credit-worthy customer who applies for it. Or, I'd find a bank who will.
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Old Nov 29, 18, 5:33 pm
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Money-losing customers aren’t credit-worthy, though.
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Old Nov 30, 18, 11:14 am
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Originally Posted by joe_miami View Post
Money-losing customers aren’t credit-worthy, though.
Non-sequitur.
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Old Nov 30, 18, 12:19 pm
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No, it wasn’t. The average churner is profitable neither for the bank nor for the airline/hotel.
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Old Nov 30, 18, 1:09 pm
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Originally Posted by joe_miami View Post
No, it wasn’t. The average churner is profitable neither for the bank nor for the airline/hotel.
Because back-and-forths are not allowed, I've said all I'm going to.
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Old Dec 1, 18, 10:49 am
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Originally Posted by joe_miami View Post
The average churner is profitable neither for the bank nor for the airline/hotel.
Being profitable for the bank is a totally different question than being credit worthy. I've gotten eleventy-seven cards from Citibank over the past 10 or so years. A number of those had 100,000 mile sign up bonuses, and I was able to avoid paying any AF at all. I'm clearly not profitable for them, but they still find me credit worthy, and issue me new cards, the one this last week having a $16,500 credit line. In fact I get an email every week encouraging me to up my CL on my Prestige and Premiere cards, which I have sitting at $4k, reduced by me from their original @$16,500 level they gave me. I'm guessing why this works for Citi is that for everyone like me, there are lots of folks who end up carrying interest charging balances, and paying late fees, which more than makes up the difference.

I know Chase and Barclays are trying not to let churners like me get new cards. But there's a downside to this as well. I used to make sure to put regular monthly spend on my Chase/Barclays cards, hoping to have this help get me approved for new cards in the future. Now that it's clear that won't happen any more, I only spend where the ROI on that spend is worth it to me. So DW and I put a cumulative $6K each month on our HHilton cards, as that gets us 6X points on GCs at grocery stores. And $6K yearly "grocery" spend on each of our Everyday Preferred cards, as that gets us 4.5 points per $. But now our Chase cards, with the exception of the quarterly bonus on the Freedom card, only see a few small charges a year, just to make sure Chase doesn't close them for lack of activity. The ROI on our IHG cards, which we keep just for the annual free night certificate, is just not good enough to reward spending any significant amount on.

The question with the airlines and hotels is quite different. They are not paying for the sign up bonuses that churners get. Au contraire, they are selling those miles and points to the cc companies. AA's last quarterly report stated that they are actually losing money on their aircraft operations, but making money on selling FF miles, mostly to banks I assume, but of course at least some to their FF members too. To the extent that having their co-brand ccs encourage folks to patronize them to take advantage of free checked bags, priority boarding, etc that does help their bottom line profits. They could care less how churners get their miles and points, they just want the banks to keep buying as many of them as possible.

Every time DW and I fly FC TATL on AA, which has been every year for the last 10 years, especially now that we can't get Saver awards anymore, and have to book Anytime Awards, AA sells Citi bank 560,000 miles. We are of course an exception, most folks don't know how, or don't bother to learn, how to play this GAME at a semi-professional level. So they end up getting one AA card, and the sign up bonus is just enough for an Economy award, which AA only gives out when they are pretty sure that seat would have gone out empty otherwise. Ordinary "normal spend" Muggles are a small profit maker for the Hotels and Airlines, whereas Wizard churners are a huge profit maker for the Hotels and Airlines.
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Old Dec 1, 18, 11:48 am
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Being “credit-worthy” is a lot more than having a good FICO score. Likewise, Chase and Barclays aren’t losing out because you’re not spending a few hundred each month at a 3% interchange fee in the hopes of taking them for additional ~$1,000 bonuses.

No sense rehashing this debate again, but people here simply aren’t being honest with themselves.
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Old Dec 12, 18, 8:56 am
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Originally Posted by RobertHanson View Post
AA's last quarterly report stated that they are actually losing money on their aircraft operations, but making money on selling FF miles, mostly to banks I assume, but of course at least some to their FF members too.
I came across this yesterday.

“Frequent-flyer programmes are massively profitable for airlines. A carrier can charge credit-card companies far more for the miles or points they offer customers than it costs the airlines to redeem them.”

Airlines should think twice before devaluing their frequent-flyer points
https://www.economist.com/gulliver/2...t-flyer-points
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Old Dec 12, 18, 9:48 am
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Credit-worthy means that a given person (or business entity) is likely to be profitable taking into account the credit risk presented. FICO scores matter as do other features considered by card issuers. Those factors predict the likelihood that you will make make payments in a timely manner.

But, that alone is not enough. Anything that makes you a "high maintenance" customer or which involves churn for bonuses and the like, costs the card issuer money and that may tip the balance from "worthy" to "unworthy".

So, if you were the "co" and insisted, the card issuer might well comply if you are willing to guarantee the credit risk and make up for costs generated by customers who otherwise aren't worth it.
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Old Dec 14, 18, 8:56 am
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The title of this thread was changed without my knowledge or permission. Disturbingly, it significantly alters the meaning of my original intent. Therefore, I hereby 1) disclaim origination, and 2) abandon it to the winds of inanity.
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Old Dec 14, 18, 7:18 pm
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FWIW I agree with the content of your OP, @RNE, even if the title was changed. As for the title itself... I think it points to the need for an additional term alongside "creditworthy". I suggest "bonusworthy". Many customers are creditworthy, in the sense that their risk of default is low and in normal usage they will generate profit for the issuing bank, but perhaps not bonusworthy, in that they churn cards well before the bank is likely to recoup the cost of a generous sign-up offer.
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Old Dec 14, 18, 8:21 pm
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Old Dec 15, 18, 3:55 pm
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Old Dec 15, 18, 9:58 pm
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I wonder what would happen if banks dropped the common man from its credit card business and focused on high-end clients alone and what would happen if airlines dropped the cattle class. A flyertalk article quoted that “in 2017 the airline industry pulled in about $38 billion in profit, yet still only netted about $20 revenue per ticket.” Funny how things work!



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Old Dec 16, 18, 8:57 am
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There have been business-class-only airlines, and most (all?) have failed.

Depends what you mean by high-end clients. There are over 100 million households in the USA, so even a product marketed to The One Percent has over a million potential customers. Many "private" banks issue payment cards only to their clients, but we cannot judge the profitability of the card products because they are bundled with wealth management services. Also, these cards are often administered by another card issuer, such as Elan Financial Services, because it isn't cost effective to do this in house with a small customer base.
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