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Is it true Capital One loves it when people carries a balance?

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Anonymous
Not applicable

Re: Is it true Capital One loves it when people carries a balance?

I can imagine why anyone would carry a balance and pay interest charges just to get a CLI? This does not make good financial sense, and I find it hard to believe that it would ever be necessary. I have never carried a balance where I had to pay interest and never would. I have taken advatage of 0% offers to buy a large item and paid off well before the offer ended. I didn't notice that got me higher CL any faster.
Message 21 of 32
creditguy
Valued Contributor

Re: Is it true Capital One loves it when people carries a balance?

They don't mind a balance because hey the interest is free money to them to an extent. But they really prefer swipe swipe swipe and pay pay pay. They know that they cater to a lot of people who are rebuilding and tend to carry balances more than say the average Amex or Discover customer, so I'm sure it's no problem for them. So while no lender particularly loves balances they don't mind, just be responsible and they will keep you around.

Message 22 of 32
Anonymous
Not applicable

Re: Is it true Capital One loves it when people carries a balance?

This is interesting information. I just started my relationship with Cap1 about 5 months ago, I am in the rebuilding process. I used this card a couple times and paid it off, it has had a zero balance for two months, now I am wondering if I should use it once a month maybe fill up the tank and then PIF, just to keep it active. I have a low limit just $300, and that is one reason I don't like to use it, because it would be easy to go over 30% utilization and I don't want to max out this card.
Message 23 of 32
HeavenOhio
Senior Contributor

Re: Is it true Capital One loves it when people carries a balance?

I'd submit that you should use the card a lot as long as you're paying for things that you'd be buying anyway. Make frequent payments so you're not eating too much of the limit at any one time. And end the month with a statement balance of 28.9% of the limit or below… or better, 8.9% or below.

Message 24 of 32
Anonymous
Not applicable

Re: Is it true Capital One loves it when people carries a balance?

Credit card companies do not like balances - balances carry the thing that lenders hate most... inherent risk. The money they make off of interest is nothing compared to the money they make from you using your cards. The interest is there to deter you from leaving a balance. They like it best when you use your card as much as possible and then pay it down.

 

Some lenders are less likely to adversely react to a balance, and some will give you a CLI if your balances are often reaching your limit and you're making substantial payments. This isn't because they like balances, it's because they believe you can swipe a lot more, increasing their revenues through your usage.

Message 25 of 32
Skymogul
New Contributor

Re: Is it true Capital One loves it when people carries a balance?

Credit card issuers love the same thing all companies do: profit. Everything about their relationship with you is geared to one thing and one thing alone: optimizing the amount of money they make off you. If you don't carry balances, the algos will optimize toward making money off per transaction fees and percentage of transaction fees on the merchant side. if you carry some balances or are a habitually maxed-out revolver, the algos will optimize your CL and APR for those situations based on your ability to pay. If the bank sees that you like to optimize your FICO and use 9% of your CL, they are going to give you 10x what you need. 

 

Banks have no "likes" or "dislikes". It's not personal. Every action they take - CLI, CLD, APR, what rewards they give you, it's all about their best profit scenario with you.

Message 26 of 32
Skymogul
New Contributor

Re: Is it true Capital One loves it when people carries a balance?

Utter nonsense. The whole reason banks offer tiered APRs is because 

 

A) They want you to carry balances

B) The APR is balanced against your risk of default in such a way that the bank has made your principal and then some off of you if/when your probability of default gets too high.

 

Banks make less than 2.5% and $0.10 off a transaction these days, while offering rewards as high as 2%. That's not a lot of gross margin. The meat of issuer profits is in interest on balances carried. Why would they not want to make money off you, ergo, why would they not "like" you to carry a balance? As I said above, the CL is not an indication of like/dislike, it's just optimized for the best way to make a profit off the customer.

Message 27 of 32
mjb59463
Regular Contributor

Re: Is it true Capital One loves it when people carries a balance?

I have a 100 dollar balance on my AmEx right now, and have for the past 2 months or so, against a 13.5k credit line. I have no issue carrying a balance like that on any card. Until I re-prioritize my reward goals, that's the only activity on that card.

If at any point they want to take their ball and go home over that (which would be utterly ridiculous) I won't stand in their way.
Scores: 790 TU (Barclay), 780 EX (Fico8), 790 EQ

Chase Freedom Unlimited (6k), CSP (20k), Amex Delta Platinum (13.5k), Amex Marriott Bonvoy (16k), Barclay Apple (12.5k), USBank Flexperks Travel Rewards (12k), Wells Fargo Visa Signature (10k), Citi Double Cash (8k), Amex Gold, Amex Platinum, Amex BBP (15k) Marriott Bonvoy Boundless (15k)
Message 28 of 32
steelers1
Frequent Contributor

Re: Is it true Capital One loves it when people carries a balance?

I don't think that its a big secret formula.

 

Capital One is in business to make money.

 

Customers that use the cards, carry balances and make payments are all good for Cap One.

 

They don't want to leave big limits unused, they want their customers to access their lines.

 

I feel that their recent changes are to minimize exposure and nothing else.

 

That is why Cap One is one of the most proftable credit card companies.

 

It could be worse they could turn into Barclay's and cut your CL down to $500

Message 29 of 32
Anonymous
Not applicable

Re: Is it true Capital One loves it when people carries a balance?

From what I see in this thread, it's all a matter of keeping your credit card use both responsible and active. Let me see if I can sum it up:

 

1) Low utilization across the board is the ideal (the most often-cited figure is a max of 30%), but don't get real obsessed with it to the detriment of your credit cards because leaving cards unused or too low-utilized for too long a period of time can trigger CLD's, which is ALWAYS undesirable.

2) Balance being responsible in your credit card usage - keep your utilization as low as is practicable, and always pay on time and as much over the minimum as you can afford if you can't afford to PIF - with being active in said usage. Those cards are there in your wallet to be used (responsibly), not to look pretty, even if, like Discover's, they are pretty.

Message 30 of 32
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