How do credit card companies earn with the promos that they have?

[Walter]

They don't earn from the promo directly. The fight now is really to encourage usage of their cards; thus the come-ons.

I myself prefer promos that give you things that help in your daily expenses. I liked the HSBC promos that gave free SM GCs and free gas at Caltex (although Caltex services sucked so it just turned me away from using them).

Using HSBC at Caltex can get one as much as 8% discount. 3% rebate plus the 100 per 2000 (5%)

[umi001]

They're basically encouraging people to spend more - and a lot of people don't have the discipline or the resources to pay their card balances in full, so they can make a lot of money on finance charges.

[crazy_boy]

A friend of ours is offering us that if we really want free coffee, we'll just have our cards swiped in their terminal once in a while and we just have to pay him 3.5% because that's what the card company deducts from the sale amount. That's just P70.00 for a cup of starbucks coffee. Although we neved did it yet.

Maybe there's different rate for different stores?

Right now, because of our house renovation, me and wifey are enjoying lots of free coffees

i used to get coffee din. but now, i just bring my coffee from home and get the free gas instead hehe sayang din yung almost 2 liters of fuel hehe

[keithdb]

basically, they earn from those who don't pay their credit cards the full amount on payment due date. deferred payments are something like 3.5% per month. kung isipin mo yan as P.A. interest rate that is around 42% P.A. So kung lagi kang deferred payment at never mo nazezero yung utang mo, mag-aadd up yang interest payment. paonti onti lang yan pero pag isum mo lets say over a 12 month period malaki din yan. Additionally yung late fees, 500 pesos agad yan. alam ko sa citibank 500 ang late fee nila.

[keithdb]

additionally, sobrang daling kumuha ng credit card ngayon, so yung chance na makakuha sila ng ignoranteng di marunong magmanage ng credit card ay malaki.

[umi001]

basically, they earn from those who don't pay their credit cards the full amount on payment due date. deferred payments are something like 3.5% per month. kung isipin mo yan as P.A. interest rate that is around 42% P.A. So kung lagi kang deferred payment at never mo nazezero yung utang mo, mag-aadd up yang interest payment. paonti onti lang yan pero pag isum mo lets say over a 12 month period malaki din yan. Additionally yung late fees, 500 pesos agad yan. alam ko sa citibank 500 ang late fee nila.

It's actually a bit worse - the finance charges are included in the next month's outstanding balance if unpaid, so you're actually compounding the interest - comes out just over 51% effective annual interest rate.