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Post Closed as "Duplicate" by user32479, JTP - Apologise to Monica♦
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jamaicanworm
jamaicanworm
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In order to get approved for most credit cards, you need to have a good credit score. But why do the credit card companies want people with good credit scores (which indicate that you're more likely to pay bills on time), when they make the most money off of charging interest on late payments?

I can think of two possible reasons, but neither seems like a complete explanation...

  1. They don't want to run the risk of people completely defaulting on debt - But it seems like the easy answer here is to approve people with medium credit scores (i.e., people who generally pay bills late, but won't default)

  2. They need cash on hand to supply credit - But it seems like they could get this by having a balance of people who pay on time, with those who don't.

I understand that credit card companies can still make money in other ways, but my question is different: why do they actively seek people who pay their bills on time (as evidence by requiring good credit scores to get approved for a card), instead of they opposite?

In order to get approved for most credit cards, you need to have a good credit score. But why do the credit card companies want people with good credit scores (which indicate that you're more likely to pay bills on time), when they make the most money off of charging interest on late payments?

I can think of two possible reasons, but neither seems like a complete explanation...

  1. They don't want to run the risk of people completely defaulting on debt - But it seems like the easy answer here is to approve people with medium credit scores (i.e., people who generally pay bills late, but won't default)

  2. They need cash on hand to supply credit - But it seems like they could get this by having a balance of people who pay on time, with those who don't.

In order to get approved for most credit cards, you need to have a good credit score. But why do the credit card companies want people with good credit scores (which indicate that you're more likely to pay bills on time), when they make the most money off of charging interest on late payments?

I can think of two possible reasons, but neither seems like a complete explanation...

  1. They don't want to run the risk of people completely defaulting on debt - But it seems like the easy answer here is to approve people with medium credit scores (i.e., people who generally pay bills late, but won't default)

  2. They need cash on hand to supply credit - But it seems like they could get this by having a balance of people who pay on time, with those who don't.

I understand that credit card companies can still make money in other ways, but my question is different: why do they actively seek people who pay their bills on time (as evidence by requiring good credit scores to get approved for a card), instead of they opposite?

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jamaicanworm
jamaicanworm
  • 219
  • 2
  • 8

Why do credit card companies want people with good credit scores?

In order to get approved for most credit cards, you need to have a good credit score. But why do the credit card companies want people with good credit scores (which indicate that you're more likely to pay bills on time), when they make the most money off of charging interest on late payments?

I can think of two possible reasons, but neither seems like a complete explanation...

  1. They don't want to run the risk of people completely defaulting on debt - But it seems like the easy answer here is to approve people with medium credit scores (i.e., people who generally pay bills late, but won't default)

  2. They need cash on hand to supply credit - But it seems like they could get this by having a balance of people who pay on time, with those who don't.