PenFed Visa - I don't get it?

[Anonymous]

So I donated something like $25 to join PenFed, applied for the VISA, and in the last two months of normal spending have made $150 in cash rewards. Since I PIF I have paid zero in interest. There has to be some over head associated with the card. So far minus transaction fees they are down at least $150 and probably more. 

At this rate I'm going to get them for close to $900 this year and that assumes normal spending. If I started using this for my practice then whew I could probably collect $3000 this year. This just seems kind of insane to me. This is serious money being made by ME for simply using the card for things I'd be spending on anyway. Even with the new 1.0% rates how is this a viable model?  

[FretlessMayhem]

I don't know if this would be their "official" business model, but they'll make a lot of it back from other members who run a balance and pay interest. Once those member's rewards are negated with the interest paid, it also pays for rewards for those who PIF in addition to their normal transaction fees.

[bostonte]

The merchants you're buying from pay for it.

The PenFed Visa goes through as a non-qualified rewards tier and the merchant needs to pay a higher interchange fee.

Since it's a CU, they pass the income on to you as higher cash back.

In theory they have more conservative underwriting, so they need less interchange income to offset defaults and choose to pass more on. 

[creditwherecreditisdue]

They're making money - no fear of that. Since it is a CU and I am a member I want them to make money - them is me!

[Anonymous]

Just kind of feels like stealing at times

[DI]

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@Anonymous wrote:
Just kind of feels like stealing at times

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If it feels like stealing donate the money to charity. 

[timber]

What great timing... there's an article in NY Times today about Visa's dominance in debit payments and how issuing bank's are profiting from it.

"The banks have used interchange fees as a growing profit center and to pay for cardholder perks like rewards programs. Interchange revenue has increased to $45 billion today, from $20 billion in 2002, driven in part by the surge in debit card use."

Here's the link to the entire article on MSNBC - http://www.msnbc.msn.com/id/34708078/ns/business-the_new_york_times/

I think it's fair to say that PenFed is doing okay. 

[Anonymous]

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@DI wrote:

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@Anonymous wrote:
Just kind of feels like stealing at times

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If it feels like stealing donate the money to charity. 

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Ha ha ha ha......DI you kill me some times. Too funny....now to be serious..... 

Message Edited by idmd on 01-06-2010 08:13 AM

Message Edited by idmd on 01-06-2010 08:13 AM

[DI]

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@Anonymous wrote:

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@DI wrote:

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@Anonymous wrote:
Just kind of feels like stealing at times

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If it feels like stealing donate the money to charity. 

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Ha ha ha ha......DI you kill me some times. Too funny....now to be serious..... 

Message Edited by idmd on 01-06-2010 08:13 AM

Message Edited by idmd on 01-06-2010 08:13 AM

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LOL. I'm being serious.  Donate and write it off in your 2010 taxes.  

[Anonymous]

Here's to my best rebate month so far. Some unusually big purchases this month related to the house plus a lot of travel equals $92 in cash back.

I do so love seeing "Finance charges paid in 2009 = $0" as well as for this bill "Finance charges=$0".

THEY'LL NEVER GET A PENNY FROM ME!  Muaaaaaaahhhhhhh........