Don’t play into credit card providers’ hands

When it comes to the perfect customer credit card providers have a very firm idea of what they are looking for. Of course, they don’t want customers that are likely to fall behind with repayment of fail to pay their debt altogether, as this will leave the provider saddled with bad debt that they may never recoup.

However, contrary to what many may believe the favourite customers of the typical credit card company is not the one that uses their card uber sensibly, repays the balance in full each month, never uses it to make cash withdrawals, and always pays up on time. Why? Because customers like these don’t make enough profit for credit card providers.

The ideal credit card customer

If a credit card company wanted to advertise for the perfect customer they would most likely be looking for someone like this:

A customer who uses their card regularly: This means that the customer will be more likely to accrue a high balance on their credit card, which is good news for credit card firms, as the higher the balance the more difficult the customer will find to pay it off in one go.

A customer who repays their balance gradually: A customer that repays their balance in full each month does not get charged interest, which means less profit for the credit card firm. Those that repay their balance gradually will usually have to pay interest, and for credit card firms this means dollar sign.

A customer that will use their credit card to make cash transactions and withdrawals: Making cash withdrawals and transactions results in costly fees and charges, and for credit card firms this means even more profit, with higher interest rates and charges applied to consumers’ accounts.

A customer that will use their credit card overseas: Using your credit card overseas can result in a range of high charges. In addition to being charged interest you can incur other fees and charges such as foreign transaction fees, cash withdrawals fees if you take money from an ATM, and more. This all adds up to a healthy profit for credit card firms.

A customer that will not question the rate of interest charged on the card: Over the past year or two credit card firms have been hiking up their rates despite base rate cuts, and many customers simply pay the new rate without question, which is good news for credit card companies. There are those that will question any rate rises, and if not happy will demand that their rate is lowered or switch to another card, which is real headache for card providers, primarily because they lose on more money.

A customer that makes minimum repayments on their balance: Credit card firms love customers that make minimum repayments each month, as this means that the cardholder will be in debt for a long time to come, and more importantly will end up paying a fortune in interest on their balance, adding to the profit mountain that credit card firms are making from their customers.

A customer that uses credit card cheques: A number of credit card companies have started sending out credit card cheques to customers, and many consumers do not realise that these cheques incur the same charges and interest as cash transactions and withdrawals. Credit card firms therefore also like customers that use these cheques, and rack up additional charges and interest.

Be smart with your credit card

In order to avoid becoming the credit card firm’s dream customer – one that will make the firm plenty of profit and will end up paying through the nose to do so – you need to be smart and sensible with your credit card spending and use. This means ensuring that you have the right credit card for your needs, avoiding making the minimum repayment each month, stopping to question things like rate and fee rises, avoiding using your card abroad or for cash transactions, etc.

Of course, you don’t want to take it to the other extreme either and end up missing repayments or defaulting on your debt, as it is not only the credit card firm that will be harmed by these actions. You could end up damaging your own credit rating, incurring costly fees, being the subject of court action, and in some cases even being forced to sell your home for as little as a £1000 credit card debt as a result of charging orders.