Of Interest- Recent Fed article on cc profits

NoMoreE46 · ‎11-03-2022

This is a recent release by the Fed on the components of cc profitability. It is a high level but concentrated read.

https://www.federalreserve.gov/econres/notes/feds-notes/credit-card-profitability-20220909.html

I attempted to summarize some of it and feel free to comment/point out any errors I made overlooked.

Component breakdown of cc profit:

Interest fee = 80%

Interchange fee and Annual fees = - 4%

Late fees and other = 16%

BT Fees, prepayments and other = 8%

Here is the percentage who paid interest and by customer type:

72.18% = Heavy revolvers (Balance every of the past 12 months)
20.81% = Light revolvers (Balance in 1 to 11 months)
0.07% = Transactors (No revolving balance)
6.31% = Other (New, inactive, etc.)

Table 1 presents summary statistics by the different types of accounts during the 2014–19 period

Who_wuda_thought · ‎11-03-2022

If I'm reading the table correctly, what stands out to me is Transactors in Purchase Volume. Share - 39%!

Looks like PIF is definitely the practice of a good number of folks using cc's.

Scores as of October 6, 2024:

NoMoreE46 · ‎11-04-2022

Right. 39% PIF which is surprisingly high to me.

NoMoreE46 · ‎11-04-2022

Also while Heavy revolvers represent only 20% of the population, they also paid 48% of the late fees.

ptatohed · ‎11-04-2022

Good stuff, thanks NME46!

[Until I can make a pretty signature, here’s an updated draft]

Everyday 5% CB:
Chase prime Visa // citi CUSTOM CASH “A” // citi CUSTOM CASH “B” // citi SHOP YOUR WAY (5% gas (in points), lucrative spending offers) // mylowe’s Rewards // Target circle card // primis Perks debit Visa (50c CB per transaction (5% CB or more up to $10 spend))

5% CB rotating:
Chase “OG” freedom Visa // DISCOVER it Cash Back // nusenda CU Platinum Cash Rewards

Everyday 4% CB:
US Bank Smartly (v1.0)

Everyday 3% / 2.2% CB:
AOD FCU Visa Signature (3%, sockdrawered) // upgrade Cash Rewards Elite (2.2%, sockdrawered)

Welcome Offer / credits only:
Chase SAPPHIRE PREFFERED (grabbed my $1,000, sockdrawered, will cancel) // NFCU FLAGSHIP REWARDS (elevated Welcome Offer, annual prime credit, sockdrawered)

Hotel card:
Chase IHG ONE REWARDS PREMIER (elevated Welcome Offer, 1 free night/yr)

On my radar:
Langely FCU Signature Cash Back (5% CB monthly selectable cat) // Safe CU Cash Back+ (Quarterly rotating 5% CB cats plus bonus cats) // upgrade MyFive Cash Rewards (5% CB monthly selectable cat) // US Bank Kroger (and family) World Elite Master Card(s) (5% CB Mobile Wallet)

Anonymous · ‎11-06-2022

@NoMoreE46 wrote:
Right. 39% PIF which is surprisingly high to me.

That's the % of purchase volume. The chart suggests that 21% are transactors, just buying more than the others!

NoMoreE46 · ‎11-07-2022

Oops I was wrong.

Thanks @Anonymous.

So even though Transactors represent about 39 % of the purchase volume, they pay less than one percent of the interest.

Anonymous · ‎11-07-2022

@NoMoreE46 wrote:
Oops I was wrong.

Thanks @Anonymous.
So even though Transactors represent about 39 % of the purchase volume, they pay less than one percent of the interest.

Right, but that is what you would expect from the definition of transactors! I guess with a stricter definition (NEVER carry a balance or do BTs) it should be 0%