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How Do Credit Card Companies Make Their Money

Financial institutions make their profits in three ways. The largest is by charging the merchant a fee for supplying the cards, and the second is by the interest they charge on your balance. The third is by charging you a fee every time you transfer a balance from another credit card company to a new one.

Credit card companies fees

Credit card companies charge fifty percent of everything you charge on your account. That fifty percent is from the interest you pay on your balance and the fees that merchants charge for every transfer. There are a couple of options that you have for getting rid of credit card fees.

The simplest is getting rid of the credit card itself. Many companies in recent years have opted not to collect fees if you call and ask them to take that amount off. While that may seem like a good idea after you’ve been charged too many fees at once you may not be so sure. When you sign up for a card, they go to great lengths to tell you the fees are lower if you have a lower balance. But when a transfer is made, the charges can jump up to twenty or even thirty percent!

The best option is to use a balance transfer credit card. Instead of having a maximum fee when you transfer a balance, the fees are only based on the amount of unreduced balance that you transfer. Over time, the amount you pay is considerably less than if you were to charge every purchase on your card. If your Mirror card has an introductory rate of three percent you would save money by transferring your balance to the introductory rate card. Not only that, but you can also build your credit history by starting with a small balance and paying it off. When you make a purchase with the card and pay the bill, it is reported to the credit bureaus as a small charge instead of when you make a larger charge and pay interest on it.

With so many ways to pay credit card fees, it is a wonder that there is any profit in credit cards. Unfortunately, that profit comes at a heavy cost, with high-interest rates, fees, and potential of harm in the event you can’t pay your bill on time.

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