The Synchrony Dilema

[sammydavidjr]

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In spite of the belief that some have that the issuer always makes some money off of every card holder, that is not true. I have cards that I satisfied the 1000 in spend to get a 200 bonus, and never have used more than 10 dollars in charges every six months since. No way the swipe fees alone have re-couped that SUB. Others such as the Amazon Prime has been used solely for 5% cash back. That too is a loser for them. The belief that issuers make money on every single user is a falicy. They make more than enough off of the many others to more than make up for it though. I literally have at least 5 cards that have only had 1500 in charges ever, and have paid me almost 220 dollars. Merchant fees alone can't cover that. After meeting the spend needed fo the Sub, I just have higher rewards on other cards.

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Lenders don't need to make money off of every card holder. They play with averages and are first and foremost concerned with avoiding the biggest losses (charged off accounts).

MyFico forumers are not average consumers: we probably cause a few tiny losses and absorb some marketing budget inefficiently by burning and churning for the SUB. But we also don't cost lenders as much as you think.
Like you, I have a Chase Amazon Prime Visa that I use only on Amazon/WholeFoods. I don't know the deal between Chase and Amazon -- but I doubt the 5% cashback we grab there is a loss for either: part of the bill for that cashback is probably footed by Amazon (not Chase). Amazon is probably happy to foot that bill because they know it makes us more loyal. They know that the average Amazon Prime Visa card holder spends more at Amazon than a consumer who does not have that card.

I'll give you an even bigger picture. After the Great Recession of 2008, the Federal Government saved a bunch of banks, and the banks in turn saved a bunch of airlines: Citi saved American Airlines, Amex took care of Delta, Chase helped United, Barclay's had US Airway's back, BoA was there for Alaska Airlines, etc. All of those lenders had an interest in saving their airline partners: one reason for it was -- of course -- how lucrative co-branded credit card programs can be for banks (miles incentivize consumer spending more than cashback). The other reason is that many (if not all) of those lenders also take a slice of the payment processing pie whenever their partner airlines sell a ticket: that tiny little percentage of the processing adds up. Consider that American Airlines alone sold $45B worth of tickets in 2019...

[K-in-Boston]

Closing Your Account. You may close your account at any time by sending a letter to the address shown on your billing statement or calling customer service. We may close your account at any time, for any reason. If your account is closed, you must stop using it. You must still pay the full amount you owe and this Agreement will remain in effect until you do.

I'm sorry that your account was closed, but it's preposterous to think that one of the largest financial institutions has not had an army of legal counsel review their policies and cardholder agreements.

[sarge12]

@sammydavidjr I agree with you, it is for issuers a question of averages. These SUB are used to entice new customers, most of which will eventually be profitable for the issuers. Many may plan to always be a transactor, and use the cards only for purchases they would make anyway. In practice, relatively few actually follow through. The fact that SUB's continue is clear evidence that the rewards reaped by the issuer is worth the cost to them. According to what I have read, the vast majority of their losses are from defaults. The other potential losses are due to strict transactors, but they represent a small amount of losses in comparison. Their profit comes from those in between these extremes. They love customers who carry balances and pay interest, while never letting it get out of control. Since the SUB's only exist because of those cardholders, I love them as well.

     The practice of offering customers a SUB presents an opportunity for those who can remain disciplined. Studies have shown that credit card holders spend more than those using only cash. Never allow the presence of a credit card cause you to spend more, rather ask yourself, would I buy this if I did not have credit cards? That is in your control, but requires discipline. Studies also show that people tend to use the credit limit as emergency funds, leading many to not see a need for emergency savings. Don't do that, because credit card debt is a poor substitute for emergency expenditures.

     Credit cards should be used to get rewards, increase the manufacturers warranty, have buyer protections, help credit scores, and help with personal book keeping. If used for those purposes, and always paid in full, cards are a great tool. They can, and often do, cause extreme financial distress, if used carelessly, so it is best to control how the cards are used. The cards also represent one of the few things in life that can and will be a no-risk small revenue stream, as long as you can control your own habits with their use. I treat credit cards like a game. The great thing about this game is that the rules set by the issuers, makes it a game I can't lose, as long as I control the guy I see in a mirror. I have about 20 cards, and every single one has made me money, except the very low interest card I let my Sister use, and She makes the payment.

     I have a concealed weapons permit and usually carry when I leave the house. I also have a wallet full of credit cards. Both can be dangerous if I do not control them. Both can be very beneficial if I do control them. I have often said the 2 most dangerous items I carry is a loaded gun, and unloaded credit cards. They both are always controlled by me, and I am always aware of the danger they represent if I ever forget that.

[Anonymous]

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@Anonymous wrote:

Back to your original question regarding opening / applying for the new Verizon card, I wonder if that may weaken your case in anyway?  If  defense counsel poses the question why would you want to open a new sync account....especially if they decline you, class action may be weakened and lead plaintiff comes off as just bitter for the decline?  Just something that popped in my head, I’m sure your attorney would have a much more educated thought or answer for you whether you should apply for the Verizon card.  I also believe I did see a thread where sync did approve someone for the Verizon card who had previously had their accounts closed as in your situation, though.  

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Thanks for the tip on the other thread.

I did ask the attorney.  He seems to think it's not an issue.  Why wouldn't someone who has been declined reapply?  It happens all the time.

[Anonymous]

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@sarge12 wrote:

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@Anonymous wrote:

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@sarge12 wrote:

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@Anonymous wrote:

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@sarge12 wrote:

Now I might be a little confused, does the reason for closure or CLD have to be due to an action or inaction of the debtor? I have always thought the lender could just lower everyones credit limit to reduce exposure if they wanted to. I thought the reasons were more that there were reasons you can't be denied for, such as race, religion, or sexual orientation. I thought they routinely take what would be considered AA when the economy goes South just to reduce their exposure. If not, that might explain a lot. I have often wondered why the card issuers do not close all my cards due to me always PIF and never paying interest. Even when Chase decided to close my Freedom Unlimited due to non-use, they actually allowed me to move the credit limit on the card to my Amazon Prime card. They also said they would keep it open if I did not agree to them closing it. No other card has even threatened closure, even though dormant over a year.

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The reason for closure or other adverse action doesn't have to be because of something you did or did not due, though often times it is.  It's often stated they can take adverse action for any reason or even for no reason, but that is technically wrong.  They cannot take adverse action because of your inclusion in a group with protected status, such as those you mentioned.  

Each lender is different.  Some will take AA due to economic conditions.  We've seen that repeatedly in the past.  Yet some will not.  Stinkrony is one of those that will.  Perhaps their own economic situation isn't as strong as it once was, or perhaps they are afraid of the economic impact on their portfolio because of the COVID-19 situation.  Maybe they need to free up money for new investments.  I don't really know, but as we have seen in numerous threads in the forums, they are on a rampage.  

Even though you always PIF, make no mistake about it -- they are making money off you.  There could even come a time when you have to pay, heaven forbid, a late fee or even interest.  You might use your card overseas and pay a foreign transaction fee.  That's just icing on the cake.  No matter what you do, they are getting their swipe fee.  Since you always PIF and handle your credit responsibly, you are probably lower risk than someone who uses more of their credit limit and doesn't PIF.  So while they may make more profit on another cardholder, their risk level may be elevated.  All things being equal, they won't want to get rid of you.  

Non-use is another story.  There they are not making any money off you and most lenders will CLD you if not outright cancel you.  That's just common sense.  Some lenders will give you 6 months and some 2 years.  Somewhere on the forums here there should be a sticky of each lender's policy.  

It's actually very easy to control your accounts and avoid AA over non-use.  I've got quite a few cards and many seldom find the way to my wallet.  Still, I usually don't feel like losing them.  I maintain a spreadsheet and one page has a list of every open account with a column for each month.  If I use a card that month, it gets checked in that column.  When I see a card hasn't been used in 3 months, I make a note and use it.  Did you know you can buy an Amazon GC reload for $0.50?  You can pay your $100 Sprint phone bill 20 times at $5 a shot.  There's ready no excuse not to use card unless, perhaps, it's a store card.

Some lenders are actually decent people.  I put Chase in that category.  Yeah, they have the crazy 5/24 policy that I dislike, but when dealing with Chase I have always found them reasonable as long as they aren't looking at you as a risk.  Maybe that's why they are so successful and a market leader?  

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In spite of the belief that some have that the issuer always makes some money off of every card holder, that is not true. I have cards that I satisfied the 1000 in spend to get a 200 bonus, and never have used more than 10 dollars in charges every six months since. No way the swipe fees alone have re-couped that SUB. Others such as the Amazon Prime has been used solely for 5% cash back. That too is a loser for them. The belief that issuers make money on every single user is a falicy. They make more than enough off of the many others to more than make up for it though. I literally have at least 5 cards that have only had 1500 in charges ever, and have paid me almost 220 dollars. Merchant fees alone can't cover that. After meeting the spend needed fo the Sub, I just have higher rewards on other cards.

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They do not lose money.  They don't look at your SUB as a loss.  That's taken off their marketing budget -- a budget they will spend with or without you.  In their eyes, they earn money on you.  

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If me making 200 dollars off a card is considered by the issuer to be profitable to the issuer, I welcome more of it. In my opinion, receiving 200 bucks I have not worked for is profitable for me. The issuer likely see it as a numbers game based on percentages. If say, 80% of those who are offered the SUB and accept it, eventually result in a profit for them, it is worth the gamble. They rely on human nature to lead the cardholder to eventually go astray and not be a strict transactor. That opens the door to those of us who use that against them to make money off of the cards. It is kind of like car insurance in a way. There are very bad drivers who have higher claims than they will ever pay in premiums. There are also those who have never filed a claim. The good drivers are in essence partially funding the cost in the claims of bad drivers. Likewise, the cardholders that windup being revolvers that are very profitable are funding the SUB and rewards of the strict transactors. If all cardholders were using the cards like me, SUB would not exist.

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You must have a unique insurance company.  Any that I have dealt with charge substantially higher premiums for those with previous claims.  

One way to look at it is that revolvers fund our rewards.  I think it's more complicated than that.  Besides, even when credit cards were first introduced, there were sign-up bonuses.  I remember decades ago my parents thrilled that by signing up for a BankAmericard they got a free Tupperware bowl.  The card was a charge card.  Even AmEx offers hefty rewards on charge cards.  Unless someone has psychopathic tendencies and asks for a replacement card all the time and calls customer service every day, they are making money off you.  

Besides, this forum is full of "strict transactors" who have slipped and gone over to the dark side.  They are hoping you will be one of them.  

[sarge12]

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@Anonymous wrote:

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@sarge12 wrote:

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@Anonymous wrote:

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@sarge12 wrote:

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@Anonymous wrote:

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@sarge12 wrote:

Now I might be a little confused, does the reason for closure or CLD have to be due to an action or inaction of the debtor? I have always thought the lender could just lower everyones credit limit to reduce exposure if they wanted to. I thought the reasons were more that there were reasons you can't be denied for, such as race, religion, or sexual orientation. I thought they routinely take what would be considered AA when the economy goes South just to reduce their exposure. If not, that might explain a lot. I have often wondered why the card issuers do not close all my cards due to me always PIF and never paying interest. Even when Chase decided to close my Freedom Unlimited due to non-use, they actually allowed me to move the credit limit on the card to my Amazon Prime card. They also said they would keep it open if I did not agree to them closing it. No other card has even threatened closure, even though dormant over a year.

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The reason for closure or other adverse action doesn't have to be because of something you did or did not due, though often times it is.  It's often stated they can take adverse action for any reason or even for no reason, but that is technically wrong.  They cannot take adverse action because of your inclusion in a group with protected status, such as those you mentioned.  

Each lender is different.  Some will take AA due to economic conditions.  We've seen that repeatedly in the past.  Yet some will not.  Stinkrony is one of those that will.  Perhaps their own economic situation isn't as strong as it once was, or perhaps they are afraid of the economic impact on their portfolio because of the COVID-19 situation.  Maybe they need to free up money for new investments.  I don't really know, but as we have seen in numerous threads in the forums, they are on a rampage.  

Even though you always PIF, make no mistake about it -- they are making money off you.  There could even come a time when you have to pay, heaven forbid, a late fee or even interest.  You might use your card overseas and pay a foreign transaction fee.  That's just icing on the cake.  No matter what you do, they are getting their swipe fee.  Since you always PIF and handle your credit responsibly, you are probably lower risk than someone who uses more of their credit limit and doesn't PIF.  So while they may make more profit on another cardholder, their risk level may be elevated.  All things being equal, they won't want to get rid of you.  

Non-use is another story.  There they are not making any money off you and most lenders will CLD you if not outright cancel you.  That's just common sense.  Some lenders will give you 6 months and some 2 years.  Somewhere on the forums here there should be a sticky of each lender's policy.  

It's actually very easy to control your accounts and avoid AA over non-use.  I've got quite a few cards and many seldom find the way to my wallet.  Still, I usually don't feel like losing them.  I maintain a spreadsheet and one page has a list of every open account with a column for each month.  If I use a card that month, it gets checked in that column.  When I see a card hasn't been used in 3 months, I make a note and use it.  Did you know you can buy an Amazon GC reload for $0.50?  You can pay your $100 Sprint phone bill 20 times at $5 a shot.  There's ready no excuse not to use card unless, perhaps, it's a store card.

Some lenders are actually decent people.  I put Chase in that category.  Yeah, they have the crazy 5/24 policy that I dislike, but when dealing with Chase I have always found them reasonable as long as they aren't looking at you as a risk.  Maybe that's why they are so successful and a market leader?  

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In spite of the belief that some have that the issuer always makes some money off of every card holder, that is not true. I have cards that I satisfied the 1000 in spend to get a 200 bonus, and never have used more than 10 dollars in charges every six months since. No way the swipe fees alone have re-couped that SUB. Others such as the Amazon Prime has been used solely for 5% cash back. That too is a loser for them. The belief that issuers make money on every single user is a falicy. They make more than enough off of the many others to more than make up for it though. I literally have at least 5 cards that have only had 1500 in charges ever, and have paid me almost 220 dollars. Merchant fees alone can't cover that. After meeting the spend needed fo the Sub, I just have higher rewards on other cards.

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They do not lose money.  They don't look at your SUB as a loss.  That's taken off their marketing budget -- a budget they will spend with or without you.  In their eyes, they earn money on you.  

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If me making 200 dollars off a card is considered by the issuer to be profitable to the issuer, I welcome more of it. In my opinion, receiving 200 bucks I have not worked for is profitable for me. The issuer likely see it as a numbers game based on percentages. If say, 80% of those who are offered the SUB and accept it, eventually result in a profit for them, it is worth the gamble. They rely on human nature to lead the cardholder to eventually go astray and not be a strict transactor. That opens the door to those of us who use that against them to make money off of the cards. It is kind of like car insurance in a way. There are very bad drivers who have higher claims than they will ever pay in premiums. There are also those who have never filed a claim. The good drivers are in essence partially funding the cost in the claims of bad drivers. Likewise, the cardholders that windup being revolvers that are very profitable are funding the SUB and rewards of the strict transactors. If all cardholders were using the cards like me, SUB would not exist.

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You must have a unique insurance company.  Any that I have dealt with charge substantially higher premiums for those with previous claims.  

One way to look at it is that revolvers fund our rewards.  I think it's more complicated than that.  Besides, even when credit cards were first introduced, there were sign-up bonuses.  I remember decades ago my parents thrilled that by signing up for a BankAmericard they got a free Tupperware bowl.  The card was a charge card.  Even AmEx offers hefty rewards on charge cards.  Unless someone has psychopathic tendencies and asks for a replacement card all the time and calls customer service every day, they are making money off you.  

Besides, this forum is full of "strict transactors" who have slipped and gone over to the dark side.  They are hoping you will be one of them.  

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In some States where insurance is required, the insurance companies must provide coverage for high risk drivers. Some have had so many accidents that even SR-22 rates are not high enough to cover the claims. Insurance in general, whether medical, auto, life, or home insurance coverage has rates set up to where those that are claim free, share the cost of those with high claims. I had a house fire that resulted in nearly 200,000 dollars in claims for the home repairs and items in the house. My insurance rate is about 750 dollars annually, so the insurance company will never recoup that much loss from me alone. I agree that many formally strict transactors have gone over to the dark side. It requires extreme self discipline to not give into temptation. My guess is only 10% or less can or will remain strict transactors. If a high percentage of card holders become strict transactors, the SUB's would no longer be offered. That is my point, the SUB was created to increase market share, but provides the opportunity to actually profit from cards if you can control your credit habits. By far, the majority of the issuers profits are from interest. Rewards cards usually break even from swipe fees/rewards or have a very small profit. There is a site that shows the breakdown, but most loss is from defaults. Smaller losses are due to transactors, but little risk there. The vast majority of their profit is from those who pay interest, but never comes close to default.

[K-in-Boston]

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@Anonymous wrote:

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...May I suggest you familiarize yourself with Google...

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May I suggest you familiarize yourself with the Terms of Service and the Friendly, Supportive, and Respectful policies of this forum and tone it down a bit?

The Equal Credit Opportunity Act prohibits creditors from discriminating on the basis of certain protected criteria, as well whether they are receiving public assistance or have exercised their CCPA rights.  It does not prevent them from closing or not opening accounts for those they do not feel are creditworthy.

The Fair Credit Reporting Act requires lenders to tell you that information from a consumer credit report was used and must give you the name, address, and phone number of the agency that provided the information if your application for credit, insurance, or employment, has been denied or other adverse action has been taken against you because of information contained in the report.

Good luck with your litigation.

[blindambition]

I'm also wondering if they're preparing for the loss of Some store cards in portfolio. Knowing some stores will file bankruptcy, with no chance of survival. Shoring up reserves to mitigate loss of revenue and defaults. 

[Anonymous]

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@blindambition wrote:

I'm also wondering if they're preparing for the loss of Some store cards in portfolio. Knowing some stores will file bankruptcy, with no chance of survival. Shoring up reserves to mitigate loss of revenue and defaults. 

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I'm sure that is a possible motive.  They will eventually lose JC Penney and a few others.  

While I doubt Stinkrony is near financial ruin, they are probably feeling a bit of pressure with current economic conditions, especially since they have more of what is termed "subprime" cardholders than, say, Chase.  They are probably just trying to stay ahead of themselves.  

[K-in-Boston]

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