If you could identify where fees get decoupled from profit in finance, I’d be open to the position that they aren’t related but you didn’t share anything along those lines. Considering the costs like cash-back programs that would erode the profitability of those fees are largely in the banks control, I don’t think that is a strong position.
You are the one implying that the revenue becomes profit. The burden is on you to make the case not on me to prove a negative. There are plenty of high revenue low margin businesses. There are also low revenue high margin businesses. So there is not a direct correlation between revenue and profit.
This is bordering on a non-productive discussion but:
Yes, revenue provides cash flow, not profit. And costs provide the other part, as was already mentioned. But if it increases cash flow without increasing relative costs, it increases profit. Do you think banks would charge fees if they could make more money by removing them? Again, the banks are largely in control of these costs, like the amount of cash back they provide. For example, the federal reserve reports that bank fees account for 1.82% of purchase volume, while cash back programs account for 1.57% of purchase volume. In other words, they make a profit on balance.
You can read the financial statements to get more information. That's where the above numbers came from. They don't generally say "Fees contribute to X% of profits" but they do indicate they are relatively large parts of revenue. For example, JPMorgan lists $5.97B in fee revenue and rewards cost $4.28B, with the difference being profit. So where are the extra costs you are implying coming from that make fees a net cost?
>> Cards don't make money from their fees. They make money from people who fail to pay and then pay the ridiculous interest.
> Interchange fees seem to be a sizable portion of revenue. Discover has listed them as 29% of revenue, BoA at ~$10B annually…
My complaint is that pointing at revenue alone does not rebut the initial statement. That's all. The argument was insufficient, not your side of the argument is wrong.
I understand that, and I was trying to be helpful and foster an discussion instead of snark. I clearly pointed to costs as well, but it didn’t seem to sink in.
Saying “revenue doesn’t equal profits” is superficially true but lacking any real substantive claim. It’s like saying “to lose weight you just need to burn more calories than you consume.” True, but a lazy attempt at a retort.
I tried to foster discussion. If profits = revenue - costs, I asked where those costs are coming from that would erode those profits. Yet again, you replied in a manner that limits discussion. Many of us come to HN because we expect higher levels of discussion than the typical Internet forum cesspool, like the guidelines lay out.
Do people who pay ridiculous interest qualify for 2% cards? Honest question; I don't carry a balance so have no idea what is advertised at other types of consumers.
I was just under the impression that the cards with the best benefits were somewhat harder to get. I do understand that credit card companies make money on interest and late fees, so they should find consumers to be attractive so long as they ultimately pay the bill/interest.
I guess the question is whether they can distinguish between people who are going to carry a balance but ultimately pay and people who are a true default/bankruptcy risk.
