To think most people don’t actually pay off their credit cards in full each month?

So, my (clearly limited!) understanding was that the transaction fees went to the credit card 'name' like VISA or MasterCard, and the issuing bank (say, Barclays) made it's money from the interest.

But judging on my record so far today I'm probably wrong.

We don’t, but it’s never been a problem. You get more protection using a credit card and I’ve never once missed a payment or been anywhere close to going over the limit. It’s always been manageable.

Yes, we've always paid it off fully every month. This has changed the last year or so as we moved and had to buy lots of pricey things from scratch. However we take advantage of NatWest instalments, so for a very small fee we can spread our payments. We don't pay any interest and normally even if we've requested to spread a bill over e.g. 6 months we'll pay it off fully in 2 months.

That's the idea of it

Interest isn’t the only way they make money. They charge vendors transaction fees whenever you use your card. I put everything on my credit card, including very small transactions. I’m pretty sure the company makes a profit from me even though I’ve never paid any interest.

That'll teach me to rush read and post! Ok, I admit I'm wrong in my assumptions.

I guess that means a lot of profit is made off people who are often carrying balances month after month- but that those people are in the minority? A bit like drinks companies make a lot of money from a minority who drink heavily?

Its been 4 or 5 years since I worked in cards but about 30% of the book were full payers

Bringing this down for you @ScholesPanda, it's very long so also adding the screenshot to save you having to scroll way way down.

I would interpret that differently in the context of the article, but I'll meet you on that.

The figures from Experian suggest just over half of all credit card users are using them for revolving credit and only 8.5% use them regularly and pay them off in full? How do you explain that?

I always have a balance outstanding “at the end of the calendar month” - I still pay my cc statement off in full every time. I get my statement on eg the 20th of the month and I have until the 20th of the next month to pay it off before any interest is charged. You’ve misunderstood what that means - it’s just that the cards are being used rather than the holder never spending on that card.

Yes I do

If you have access to internal industry statistics, and you can show these, then fine. But I'm working off the following:

https://www.money.co.uk/credit-cards/credit-card-statistics

As of October 2021, there were approximately 52.97 million credit card accounts in the UK, with almost two-thirds of these (34.79 million) being active (those with balances outstanding at the end of the calendar month).

65.6% had balances outstanding (not paid off in full) then.

Also:

Transactors, which make up 8.5%, will pay their statement balance in full every month and generally have one of the better average scores on Experian’s aggregated bureau index.
Representing over 11% of users, revolvers do not pay their outstanding balance in full every month and will incur a resulting rate of interest on their credit card debt. As a result, their bureau index score is severely less, at 895. Hardcore revolvers are the most popular group. At 31.5%, these people only pay the minimum amount each month, which in turn produces the lowest average score of 803 (over 200 points less than transactors).

Transactors paid their balances in full very month. Revolvers do not, and hardcore revolvers only make minimum repayments.

Finally, a couple of articles that show credit card companies make greater profits and revenue from interest than they do from transaction fees:
https://www.federalreserve.gov/econres/notes/feds-notes/credit-card-profitability-20220909.html

https://www.fool.com/money/research/credit-card-company-earnings/

I admit, none of these sources are perfect, they are what I have access to in the middle of the day.

So, if you have evidence that the credit card industry is structured very differently in the UK to the USA (or the ROW given VISA and MasterCard are multinational), or that UK borrowing habits are much better now than they were in 2021 I'm happy to be shown to be wrong.

That's a pretty cavalier use of the word 'clearly'.

Yep.

Do you know something that the official figures don't? All the published data shows that more people clear their balance than dont

Maybe you don't know this but the card processors take a %age of every transaction from the retailer as well as interest from customers.

Have you got any evidence for that? Because I find that very unlikely. They don’t just make money via interest, they make it via transactions. I’ve used credit cards for decades, never paid a penny of interest and never had a card cancelled, my limit just gets bigger and bigger. They’re making money from me, and it’s not on interest.

I've paid it off every month for the last ten years. Usually I don't wait until the end of the month I just pay it off as soon as I can after the transaction.

When I was younger though I had a terrible credit history, not in terms of missing the minimum payment but in terms of allowing the balance to build until it was at the limit then only paying the minimum payment every month. Being in that much debt in relation to my income was horrible, there was no way of getting out of it (except the obvious, get a better paid job).

There are three types of credit card user. The one who pays it off every month because they don't want to be in debt (I am them), the one who would like to pay it off but can't afford to (I was them and hopefully never will be again), and the one who is so wealthy they don't give a toss about paying it off on time because whatever, they can afford the interest and have better things to spend their time on.

Always pay it off in full here. Although, one time I used it to buy a car and then had an unexpected delay in getting a bonus from work, so ended up letting the balance roll over for a week or so.

In fact, those who pay it off every month are increasingly having their cards cancelled as unprofitable customers

thats certainly not the case for us….they keep putting our limit up

I definitely do.
I have a "credit card savings" account and at least once a week I make sure my account matches the credit card.
I used it for credit rating purposes and also shopping protection.
I used the PayPal split four months if I need to order clothes in multiple sizes. And then if I for example order two things but two different sizes and I'm only likely to keep two of the items I put them in an account.
Sounds a bit long winded but isn't and works for me.

Why not? It still needs to be paid eventually. Unless you’re putting that money aside to earn interest and the money will be there waiting to pay it off when due.

It’s also not a good idea to use a debit card as your bank could be frozen because of fraud. Credit card is better as less bother if compromised

I wouldn’t pay off a 0% one but an interest bearing one I would

I don’t agree. I’ve had my credit card with a particular provider for almost 20 years. We put all our spending on it to earn points, so a significant amount every month and it’s always been paid off in full. No signs of them cancelling it.

I don't know why you've been called unreasonable here.

Clearly most people carry a balance on their card- if everyone/ most people paid it off every month without incurring interest, the card issuers wouldn't make any money and the entire business model wouldn't exist.

In fact, those who pay it off every month are increasingly having their cards cancelled as unprofitable customers.