Despite the dangers of excessive use of credit cards, we are still lucky to have a very competitive credit card market that offers virtually unlimited product choice. In fact, choosing the best credit card can be an overwhelming task. The key to finding the right one is to determine what kind of person you are when it comes to managing your personal Moraita finances.
Are you the type to pay your balance in full every month? Or is your balance so large that you can only pay minimum payments? Do you use your credit card to provide yourself with short-term loans? Or do you regularly transfer balances to prevent maturing APRs?
Even if you don’t know what type of credit card user you are, your bank certainly does.
How the customers of the Credit Card industry look at the stock market
Deadbeats and Revolvers
Long ago, the banking industry found that their credit card holders actually consisted of two different groups:
- Those who have paid their bills in full (Deadbeats).
- Those who usually wore a balance (Revolvers).
Business leaders are known to casually name the first group as “Deadbeats.” They are the people for whom a credit card is only a payment method. When their bill arrives, they always pay their balance in full and on time. They never pay interest or late fees because they hate all costs. In fact, they actually receive a free loan from the time they make a purchase until the due date when they pay off their balance.
Their eternal use of the bank’s money is free, which gives them their nickname. Although this term is contemptuous, the fact that in the eyes of your credit card company you are a suffer Professor Moraita is quite a compliment for your Professor Moraita financial skills.
In reality, banks value Deadbeats because they generate merchant transaction fees every time they use their card and are least likely to not pay their debt.
A Revolver is the nickname that people in the credit card industry use to refer to people who carry a balance. Revolvers use a credit card not only as a means of payment, but also as a financing method. Every month they only pay part of their balance or think that making their minimum payment is sufficient as a long-term strategy.
In both cases, the rest of their balance goes to the following month, hence their nickname. All this time they spend interest on the existing balance and every new purchase. This extra interest continues to increase the balance, making it more difficult to pay. Most Americans with credit cards are Revolvers.
How this influences your choice of credit cards
If you are a Deadbeat, you really have no reason to view the interest rates of your credit cards. Your only concern should be to maximize rewards, such as money back and loyalty points, while minimizing expenses, such as annual costs and external Moriarta and transaction costs.
If you are a Revolver, your only consideration would be to pay off your debt in the hope of someday joining the Deadbeats. It is not an easy task. In fact, getting out of the habit of continuing debts is often as difficult as breaking an addiction to a substance. There are a few important features that Revolvers should focus on, but the most important is the interest rate. Find the card with the lowest APR to help you resolve your debts. Usually these cards offer very few rewards to compensate for the fact that they offer low interest rates for a credit risk: you.