What do credit card companies really want from you?
This may be a gross generalization, but we bet that their main goals aren’t to help you build credit, finance the things you can't afford, or to give you free rewards points and airline miles.
Credit card companies want your money—as much of it as they can get.
That's why every great 0% interest rate offer eventually ends, why the best rewards cards have annual fees, why there continues to be fine-print fees, and why credit card companies aren't too fond of the CARD Act.
While credit cards are one of your best credit building tools, they are credit card companies' ultimate moneymaking machine. Companies trust that even credit-savvy cardholders end up paying an arm and a leg in interest on our credit card debt—and we do not disappoint.
What else do credit card companies want from us? The answers to the following questions, if they could. Why? Of course: These answers could make them even more money.
1. What's In Your Paycheck?
As of now, credit card companies can only ask you for an estimate of your monthly household income. They use this information, coupled with the reports of debts and loans on your credit report, to estimate your income—and your propensity to pay back your credit card. This kind of information informs decisions such as whether to accept or reject an applicant, or whether to grant a credit limit increase. It's not a science... yet.
The Federal Reserve may tighten these rules so that applicants must report their individual source of income, not the household's. While this may help credit card issuers more accurately assess applicants and avoid losses, it could also shut out stay-at-home parents who do not have individual sources of income.
2. How's Your Bank Account Looking?
Credit card issuers would almost certainly love to know what's in your bank account, your savings, and most importantly, your banking behavior. Just like peeking at your credit report, more financial information in their hands gives them a broader picture of your financial situation. For example, more money in your bank account could mean you're willing to spend more than your current credit limit, and stopped or cancelled payments may point to financial distress.
3. How Many Kids Do You Have?
Remember that big chunk of the CARD Act intended to protect young consumers and college students? That was done for good reason. Credit card issuers were pretty crafty using cool freebies to entice young consumers to apply for a credit card. While practices like that are illegal now, credit card issuers are reaching younger potential cardholders by increasing credit card offers in the mail and becoming very savvy in pretty social media. Just ask the mother of a 3 year old girl who received an American Express offer in the mail.
Luckily, credit card companies can't ask you any of the above questions—it would be intrusive and a little creepy. But, it does point to the need for consumers to remain vigilant and careful of money-gouging credit practices, as well as protective of their sensitive financial information.
For good credit health, keep your money close and your credit card closer.