Bankers love customers who carry credit card balances and pay only the minimum — that's pure profit for them. Here's how to enjoy the convenience of a card while denying the banks one extra penny.
Everyone wants to be loved, but it’s not necessary to be loved by everyone. You can get along just fine if your banker, for instance, doesn’t love you. It’s more than enough to be respected and courted by a bank than to be loved.
What’s the difference? Let Billshark explain.
1 Credit Card Debt Is Soaring
Bankers will love you if you charge substantial sums on your credit cards and never pay it off. They’ll be even happier if you make only the minimum payment each month. That’s more money in profit for them, even though it’s a sure route to financial hell for you.
According to Bankrate.com, 42 percent of all U.S. adults have credit card debt. The average U.S. household with credit card debt has an estimated $6,829 in revolving balances (that is, balances carried from one month to the next). That figure was expected to jump to $8,701 in the third quarter of 2019.
Nerdwallet.com reports that credit card balances carried from one month to the next hit $443.96 billion in September of last year, and that credit card debt has increased almost six percent in the past year, and more than 34 percent in the past five years. And CNN recently reported that credit card balances rose $13 billion during the third quarter of 2019.
But do you think bankers would be satisfied with all that borrowing, and adjust their rates accordingly? Of course not. The average credit card interest rate recently hit 17 percent, the highest level in at least 25 years, according to CNN, making this an especially costly form of borrowing.
Despite the fact that the high interest rates were partly blamed on competition among lenders to sweeten credit card offers—travel perks, shopping discounts, and so on—the bulk of their windfall was in profits. For example, Visa reported a 17 percent profit increase in its most recent fiscal year. MasterCard’s most recent quarter saw an 11 percent profit hike in its most recent quarter. Note that these are increases to their already hefty profits. And this in a year that saw three interest-rate cuts from the Federal Reserve.
2 The Price You Pay
But while the bankers are making out like fat rats, the average American is losing huge sums of money in unnecessary interest fees.
Let’s take the example of that average $6,829 in revolving balances mentioned above. If that balance carries an interest rate of 17 percent, the holder of that credit card pays about $100 each month in interest, or $1230 a year. And those with lower credit scores pay higher interest rates, as much as 25 percent.
Many people manage to get along without credit cards, but there are disadvantages: It may be difficult to rent a car, shop online, or book a hotel, for example, and it’s easier to build a credit history when you have one or more credit cards.
For convenience sake, however, most people carry credit cards. That doesn’t mean, though, that you have to let them rule—or worse, ruin—you. All it takes is a little knowledge, and the determination that you’re not going to give the banks one extra penny of unnecessary profit.
3 How to Use a Card Without Feeding the Banks
Here’s how:
1. Use it every month. To build good credit, you need to use the card regularly. This keeps the account active, and gives the credit card company something to report to the credit monitoring agencies.
2. Pay in full. Then pay it off every month. The entire balance, not just the minimum payment.
3. Always pay on time. Do whatever it takes to ensure your credit card payment reaches the lending institution on time: phone reminders, auto pay, calendar notations.
4. Watch your credit utilization ratio. If you have a credit limit of $1,000 and you spend $975 of that in a single month—even if you pay it all off with your next bill—the credit-scoring agencies won’t like that, especially if you make a practice of it. Aim to stay at or below 30 percent of your credit limit each month (the ratio of how much credit you have available vs. how much of it you use, i.e., your “credit utilization ratio”).
These steps will give you the convenience of a credit card and help build your credit score but deny the banks superfluous fees and interest.
4 Stop Overpaying on Your Other Bills
Besides bankers, another group that’s trying to scoop up every penny they can from you are the Internet, cable, and satellite service providers, your wireless phone company, and home security company. Billshark can find all the unnecessary charges from these people and save you hundreds of dollars. So send us your bills for a free review. You pay only if we can save you money.
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Frequently Asked Questions
Why do bankers want you to carry a credit card balance?
Bankers profit when you charge substantial sums and never pay them off, and they're even happier when you make only the minimum payment each month. Carrying a balance generates interest income for them. With the average credit card interest rate recently hitting 17 percent, the highest in at least 25 years, an unpaid balance is an especially costly form of borrowing for you and a steady source of profit for the bank.
How much does the average household pay in credit card interest?
The average U.S. household with credit card debt carries an estimated $6,829 in revolving balances. At a 17 percent interest rate, that works out to about $100 each month in interest, or roughly $1,230 a year. People with lower credit scores pay higher rates, as much as 25 percent, so their cost can be even greater.
What is a credit utilization ratio and what should it be?
Your credit utilization ratio is how much credit you have available versus how much of it you use. If you have a $1,000 limit and spend $975 in a single month, the credit-scoring agencies won't like that, even if you pay it off with your next bill. Aim to stay at or below 30 percent of your credit limit each month.
How can I use a credit card without giving banks extra profit?
Use the card every month to keep the account active, pay the full balance rather than the minimum, always pay on time using reminders or auto pay, and keep your utilization at or below 30 percent of your limit. These steps give you the convenience of a credit card and help build your score while denying the banks superfluous fees and interest.
How can Billshark help me beyond credit cards?
Besides bankers, Internet, cable, and satellite providers, your wireless phone company, and your home security company all try to scoop up every penny they can. Billshark can find the unnecessary charges from these companies and save you hundreds of dollars. Send your bills for a free review — you pay only if Billshark can save you money.
How to Make Bankers Love You is a Billshark resource with information and navigation relevant to recurring bills, consumer choices, and savings decisions.
Bankers profit when you carry credit card debt. Learn how to use a card, pay it in full, and keep utilization low so the banks don't win. Save more today.
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Bankers love customers who carry credit card balances and pay only the minimum — that's pure profit for them.
Everyone wants to be loved, but it’s not necessary to be loved by everyone.
What’s the difference?.
Bankers will love you if you charge substantial sums on your credit cards and never pay it off.
According to Bankrate.com, 42 percent of all U.S.
Nerdwallet.com reports that credit card balances carried from one month to the next hit $443.96 billion in September of last year.
But do you think bankers would be satisfied with all that borrowing, and adjust their rates accordingly?.
Despite the fact that the high interest rates were partly blamed on competition among lenders to sweeten credit card offers—travel perks, shopping discounts, and so on—the bulk of their windfall was in profits.
But while the bankers are making out like fat rats, the average American is losing huge sums of money in unnecessary interest fees.
Let’s take the example of that average $6,829 in revolving balances mentioned above.
Many people manage to get along without credit cards.
For convenience sake, however, most people carry credit cards.
1.
2.
3.
4.
These steps will give you the convenience of a credit card and help build your credit score but deny the banks superfluous fees and interest.
Besides bankers, another group that’s trying to scoop up every penny they can from you are the Internet, cable, and satellite service providers, your wireless phone company, and home security company.
Bankers profit when you charge substantial sums and never pay them off, and they're even happier when you make only the minimum payment each month.
The average U.S.
Your credit utilization ratio is how much credit you have available versus how much of it you use.
Use the card every month to keep the account active.
Besides bankers, Internet, cable, and satellite providers, your wireless phone company, and your home security company all try to scoop up every penny they can.
Billshark negotiates your bills for you — no savings, no fee.
Billshark helps lower internet, wireless, cable, satellite radio, and other monthly bills.
Our experts handle providers for customers and share updates throughout the process.
Customers pay only when Billshark finds savings on eligible bills.
1 Credit Card Debt Is Soaring.
2 The Price You Pay.
3 How to Use a Card Without Feeding the Banks.
4 Stop Overpaying on Your Other Bills.
Frequently Asked Questions.
Why do bankers want you to carry a credit card balance?.
How much does the average household pay in credit card interest?.
What is a credit utilization ratio and what should it be?.
How can I use a credit card without giving banks extra profit?.
How can Billshark help me beyond credit cards?.
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