Exposed: The Credit Cards’ Banks Earn The Most From

Fact: Specific credit card types bring in more revenue from customers for banks than others. It’s simply the nature of the type of credit card, and what it’s designed for. For example, a provider expects a customer with a low rate credit card to occasionally accrue profits from them in interest repayments, while a no annual fee credit card would typically yield much lower revenue.
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The following credit card types bring in providers a large portion of their credit card revenue:
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#1 – Long Term Balance Transfer Cards

Credit cards which offer a ‘for life’ balance transfer offer a real money makers for banks. They are by no means a ‘rip-off’ card, or of lesser value. It is simply their nature – people who undergo these offers will typically spend years repaying their balance, thus mounting significant interest over the life of their balance. Not only will the financial provider receive 4-8% p.a interest on a large balance over the coming years, they’ll also reap the annual fees.
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#2 – Gold & Platinum Cards

These cards give you easy and automatic access to a bundled travel, insurance & security package. If you were to apply for these manually for yourself, you would generally be paying more than what your annual fee covers. For that reason, these cards are of true value to those who take advantage of the travel benefits. Let’s analyze a hypothetical cost comparison of travel benefits:

• Cost of travel benefits when applied for manually by an everyday customer: $200
• Cost of travel benefits when covered by a gold/platinum card annual fee: $150
• Cost of travel benefits when applied for/managed by a financial provider: $70

As the financial provider would be managing their travel benefits in bulk, they would essentially be paying much less than the everyday customer.
Even though the consumer pays less for the travel benefits via a card’s annual fee, banks are still the ones who ultimately cash in. Another factor to take into account: A small percentage of cardholders would not even utilize their travel insurance benefits, thus increasing the bank’s profit margins further.
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#3 – Cash Advance Cards

Regardless of what type of credit card a bank offers, cash advances will always be a contributing factor to profit from their consumers. Even though cash advances are reserved for emergencies, their high interest rates and lack of interest free days makes them invaluable revenue streams for banks.
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That’s why a credit card solely designed for cash advances comes in at number 3 on our list – while these cards offer lower rates and occasionally less withdrawal fees, it’s only relative, and by no means ‘cheap’.
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#4 – Reward Program Cards

While there are a fraction of reward program card holders who manage to never accrue interest and cover their annual fee with reward points, the mass of Australian’s who use a rewards credit card incorrectly strongly compensates.
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A reward’s credit card is practically an investment – you need to put in the money, research and dedication in order to yield results, otherwise you can lose money. Except with reward cards, replace the word ‘can’ with ‘will’. The ways banks cash in on reward card holders include:

• Reward cards have high interest rates. For those rack up interest, ‘ka-ching’ for the banks.
• Reward cards typically have high annual fees – if you don’t spend enough money to even offset the cost of your annual fee, your card is costing you more than it’s rewarding
• Similar to the concept introducted in ‘#2′, financial providers have an edge over regular consumers when it comes to retail rewards, due to bulk and promotion. For instance, Bunnings may offer their lawnmowers to a bank at a lower cost if they agree to add it to their rewards catalogue. The consumer however, will be paying the full price in the relative value of their reward points.

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The recurring theme among these credit card types is that although the banks profit off them more, it doesn’t imply that it will cost you more. It is either the natural nature of the credit card to cost more, or a minority of users who don’t utilize their card properly.

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Think you have what it takes to responsibily manage an introductory offer and reap the cheap benefits? Then head to our promotional offers section for the greatest and latest credit card deals on offer in the Australian market.

Comparison of our Top Credit Card Offers

		Interest Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual Fee	Cash Advance Rate (p.a.)
Citibank Clear Platinum Card	A low interest rate offer on balance transfers and purchases	11.99%	2.9% for 12 months	$99	21.74%
St George Vertigo	An introductory offer on balance transfer and a low annual fee	13.24%	0.99% for 12 months	$55	21.49%
Virgin Flyer Credit Card	Earn 1 velocity point per $1 spent, plus an introductory offer on balance transfers	20.99%	1.9% for 9 months	$99	20.99%
Westpac 55 Day Credit Card	No annul fee for the first year with a low rate on balance transfers and purchases	0% for 5 months (reverts to 19.59% )	3.99% for 6 months	$0	21.49%
ANZ Frequent Flyer	An exclusive bonus points offer, Plus extended warranty, overseas travel and medical insurance,90 day purchase security insurance.	19.74%		$95	20.99%