Private Label Credit Card
Categories: Credit
Vanity plates. You see them on car license plates. You see them on toothy grilles. You note the engraved backplates of early iPhones. All about marketing...whatever it is you wanna market.
So when you have a private label card, you're usually extending the financial reach of a large company that is hoping to have you in their thoughts...even when you're not directly using their product.
Southwest, Disney, and a bunch of other big consumer brands have these cards. They work like any other card, only...a bit worse. Unless you actually use their frequent flyer miles or points toward trips between Phoenix and San Jose, or for partial room upgrades at the Disney Orlando WonderWorld Hotel.
The cards carry the logos of the brands. They carry interest charges if you don't pay them off each month. They carry an annual fee. And in real life, usually when a brand has issued these cards, they were first approached by a big bank that wanted to use their happy brand names to extend the bank's credit reach. Banks make a fortune issuing credit cards, so they like having them...out there. Citi backs MasterCard; so does Wells; B of A is more of a Visa place. But the money is all green, and it's likely that the bank will have paid Disney or Southwest a bounty of, say, $100 for each card that those big brands can sell.
Remember that the next time you're standing in line for the Star Wars ride and some seller hits you up to buy a Disney card. The Force is not necessarily with you. The bills, however, will be.
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Finance: How Do Credit Card Companies Wo...116 Views
finance a la shmoop. how do credit card companies work? you could write a
book on this but don't. it'll hurt instead think about a credit card [man carries huge book and grimaces]
company is kind of twisted moneylender who really makes money in two ways.
well first they make money from the people who take your credit cards like
when you use your credit card to lovingly pay shmoop 20 bucks a month for our
awesome content. thank you very much. that $20 charge carries about a 1% hit. from
the credit card company that is the hard-working elves here at shmoop only
keep about nineteen dollars and 80 cents from that twenty you just paid. credit [equation]
card companies need to pay for their jets right? well that one transaction was
just 20 cents but there are gujilion's of them so the dough adds up to billions
and billions really fast. unless do you think the job of being a credit card
company is easy, note that every few thousand transactions is done by some
bad actor like no different kind of bad actor. you know meaning of theif someone
behaving badly they've stolen your card and if race to Best Buy [man runs out of store carrying TV]
hoping to abscond with ten flat screens to sell on the street corner and make a
fast buck. while the credit card company is generally responsible for those
frauds against mankind and have to hunt down the bad guys .so that's one way
they make money. the other way credit card companies get paid is that they get
money from consumers who use them either directly or indirectly directly. means
something like an annual fee. and then there are charges well you know that is
if you don't pay off your credit card bill each month you carry what is called [credit card rates listed]
a balance. and on those amounts you pay huge interest. like for many buyers on
credit the fee is 15 to 20 percent per year these days and sometimes more. so if
you bought a thousand dollar television set with your 20% credit card and didn't
pay it off for three years you'd have paid $200 a year in interest for three
years or $600. do you think Visa Mastercard or Amex pay 20% interest for
the money they borrow to lend to you? hardly they pay very very low interest
rates like just a few percent in there so on the [visa employees pictured]
20% they charge you an interest to punish you for not paying off your
credit card their cost is more like 2% I either making like an 18% spread or
profit margin on that money. the 600 bucks you paid for renting the grand for
3 years from the kindly loving people at visa
Oh made visa over 500 bucks on that money nice. work if you can get it and [equation]
you know a really nice jet.