Is credit card industry lucrative???

[GoldenloveNY]

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@InvincibleSummer3 wrote:

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@HiLine wrote:

Guys, Wells Fargo is huge. They are 4 times as big as US Bank. It's not about size.

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But size does matter....

Just sayin'.

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It depends. You could be small, but if you know how to work the system, then size doesn't seem to matter much.

Wait....you was talking about actual banks, right? I mean......hummm.....

[jamesdwi]

Its all about risk, yes 15-29% + 3% swipe fee's are nice returns, but the bank may loose everything if the economy tanks or credit card holder files BK, except a write off, stock holders aren't all that thrilled that the bank got to write off a billion dollars in credit card losses. Some banks would prefer to have a larger part of there portfolio be secured loans, Auto, Home, Gov guaranteed Student loans) sure the interest rate isn't as high but the risk is a lot lower.

If it was all about the possibility of earning high interest rates the banks would all be focusing on the sub sub prime market, 29+ percent interest, 3% swipe fee, $450 in AF plus monthly fee's, then add in the potential for earning $35 late fee's and any number of fee's, and the chance to sell out space in the envelop for other bottom dweler retailers items that make fingerhut look like a high quality retailer.

[InvincibleSummer3]

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@GoldenloveNY wrote:

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@InvincibleSummer3 wrote:

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@HiLine wrote:

Guys, Wells Fargo is huge. They are 4 times as big as US Bank. It's not about size.

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But size does matter....

Just sayin'.

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It depends. You could be small, but if you know how to work the system, then size doesn't seem to matter much.

Wait....you was talking about actual banks, right? I mean......hummm.....

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That may explain Wells, then. They're large, but have not much idea what they're doing in the credit sector. I was surprised to see how few credit products they do.

ETA winkwinknudgenudge. 

[InvincibleSummer3]

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@TheSpeculator wrote:
Certainly it is. There are what, 600 million credit cards in the US alone. My horror story was a $400 INTEREST charge (yikes). I'd say especially lucrative towards people who aren't half knowledgable about credit.

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Capital A- agreed. Also, how many people come here thinking they need to carry a balance in order to get better credit? Or charge them to the hilt & then pay slowly?

[solxp]

Banks like WF and BoA make a ton of money off gouging there low income customers. 90% of people with a BoA or WF card also bank with one of them I would bet 90% of chase card holders do not bank with Chase due to there much smaller Banking footprint. Companies like First Premier make make millions each year in profits and they cater to HIGH RISK people who other banks wont touch. 

[enharu]

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@solxp wrote:

Banks like WF and BoA make a ton of money off gouging there low income customers. 90% of people with a BoA or WF card also bank with one of them I would bet 90% of chase card holders do not bank with Chase due to there much smaller Banking footprint. Companies like First Premier make make millions each year in profits and they cater to HIGH RISK people who other banks wont touch. 

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Not sure where you get the idea, but Chase has a big banking footprint as well.

Citi, Wells Fargo, Chase and Bank of America are biggest banking institutions in the United States (not listed in order of size).

To a bank it's not just about checkings, savings, credit cards and mortages. They are also involved in all sorts of other businesses which can rage from investment banking, B2B dealings, government lending / financing including military, equities / futures / options / derivatives trading, etc etc. This is why the US government is literally forced to bail them out because they are too big to fail. 

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@w20031424 wrote:

Why Chase has such a big market share of credit cards while Wells Fargo seems to show minimal interest of these platcis?    They don't profit or what?

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It's all about risk management and risk preference.

Credit card debt is unsecured, and credit card debtors have last priority to reclaim / lquidate your assets in the event of a bankruptcy or default. Most of the time they get nothing when a client defaults. As you can see, this can be really risky. At the same time, it is also very profitable, because of the swipe fees + high interest rates they're charging you.

Certain banks just prefer to deal with lower risk investments, and they're okay with getting lower returns. Certain banks deal with higher risk, and expect higher returns (i.e. Lehman Brothers). Of course, when everyone is paying their bills on time, the banks make really good money and everyone's happy. However when the economy collapses due to a downturn, which on average happens every 12 years, many people start to default on their debts. That's when things get really ugly. Banks who had overexposed themselves to risk often then run into financial trouble, and they either go bankrupt or hope for a government bailout.

There's really nothing wrong with both strategies. It's just a matter of the bank's board of directors' preference and management style of the company. 

[jsucool76]

While WF is the fourth largest bank in the US, most of their portfolio is made up of actual banking customers, and mortgages, whereas banks like chase, citi, and boa basically only advertise their credit cards.

[enharu]

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@jsucool76 wrote:
While WF is the fourth largest bank in the US, most of their portfolio is made up of actual banking customers, and mortgages, whereas banks like chase, citi, and boa basically only advertise their credit cards.

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BofA was the 2nd largest mortage lender in the US a few years ago. Not too sure about right now, but they're 3rd if I am not wrong.

1st being Fannie Mae / Freddie Mac all along.

Citi, Chase and BofA is very diversified in their portfolio and as a result they do all do all kinds of banking and they're really big at it too. They're pretty much the juggernauts in the US banking industry. Citi has much bigger operations overseas than they do in the USA if I am not wrong.

Also, many of the banking businesses they're involved in are not often mentioned of to the public, because they target business to business lending, government lending, equipment financing for factories, etc etc. The largest few banks are pretty much quite diversified. Some have a bigger market share or advantages in certain areas of banking, but overall they're pretty much everywhere. 

Firms like American Express, Capital One, Discover, etc. are heavily invested in credit card operations. American Express and Discover have diversified to other areas of banking, but their credit card business brings back the lion's share of their income. 

There's really no right or wrong, as long as it's working out well for them. Just like how Goldman Sachs is still mostly involved in Investment Banking even though they are a Bank holding company. Everything boils down to risk exposure and expected rewards.

[bribro]

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@solxp wrote:

Banks like WF and BoA make a ton of money off gouging there low income customers. 90% of people with a BoA or WF card also bank with one of them I would bet 90% of chase card holders do not bank with Chase due to there much smaller Banking footprint. Companies like First Premier make make millions each year in profits and they cater to HIGH RISK people who other banks wont touch. 

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They say 90% of statistics are made up on the spot, and that's definitely the case here.

JPMorganChase is the largest U.S. bank by assets AND by deposits, with ~$2.5 trillion and ~$1.1 trillion, respectively. By no means do they have a small banking footprint. That may have been the case 5 years ago before the WaMu acquistion and their aggressive expansion in the West Coast, but no more.

[enharu]

JPMorgan Chase already had an extremely huge footprint with the acquisition / merger of Bank One and all those other banks they swallowed

They just decided to continue naming it as Chase only because the name itself is much more recognizable for consumers. Same reason why they kept the JP Morgan name even though JP Morgan was very small compared to size of the firm when they merged.

Pretty much the same story with cellular companies. AT&T decided to rename themselves as AT&T instead of Cingular after their merger even though Cingular was much bigger than AT&T. AT&T is just a much more established brand name than Cingular was, for good and bad reasons.