5 Types of Credit Card Users – Credit Card Company Perspective

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The topic of credit cards is one that elicits varied responses from individuals based on their personal experiences with them. In my opinion, there are many good things about credit cards. Others, however, feel the opposite. Like them or not, credit cards are a part of mainstream society and they are here to stay. Most…

The topic of credit cards is one that elicits varied responses from individuals based on their personal experiences with them. In my opinion, there are many good things about credit cards. Others, however, feel the opposite. Like them or not, credit cards are a part of mainstream society and they are here to stay.

Most people only look at credit cards from the consumer’s perspective, and not from the perspective of the credit card company. When you look at credit card users from another perspective, things change and you can learn about people’s habits, hopefully, including your own. And understanding your credit card habits is an important thing to do.

In my opinion, there are 5 main types of Credit Card users:

  1. Max Payers – pay in full on-time, every time. While credit card companies don’t make as much money from Max Payers as they do from other customers, they are still profitable customers to have around. Credit card companies charge stores around 3% for each transaction, so even when they are paying Max Payers a 1% cash back reward, the credit card companies are still making money. Max Payers are also important to the credit card companies because it allows them to lend out more money. Think about this for a second – if credit card holders didn’t pay the money back regularly, the credit card companies would have less money to lend.
  2. Revolvers – always carry debt. These are the favorite customers of credit card companies. These customers only make the minimum payment or slightly more, and often stretch their payments out for years. Their debt may be large or small, but it is rarely paid off in full. On the occasion when the credit card does get completely paid off, this type of credit card user will usually make new charges. The interest rates and fees these users pay are the bread and butter of the credit card industry.
  3. Deadbeats – never pay, nor have any intention of paying. These are the credit card companies’ least favorite type of customer. Deadbeats are what keep interest rates and fees high for everyone else. Some of these cards are obtained fraudulently, or by people who make a game out of signing up for every card they can so they can get a free t-shirt, store discount, or other small reward. Deadbeats are bad for credit card companies, and they are bad for the other consumers. Don’t be a deadbeat.
  4. The Arbitragers – game the system to make money from 0% balance transfers. This is something that has only been around for a few years, and some people have turned this into an art form – literally borrowing over $100,000 from various credit card companies and earning money from the interest. Many credit card companies have recently cracked down on this practice by reducing the amount of 0% balance transfer offers, or by implementing high fees to transfer the balances. However, there are still enough companies doing it to make it profitable to people who know what they are doing.
  5. The Reformed Credit Card User, or, the Non-User. These are former credit card users who, for one reason or another, have decided to stop using credit cards altogether – including for emergencies. Usually, reformed credit card users have had previous problems with credit card debt and have decided the best way for them to stay out of credit card debt is to stop using their credit cards. The credit card companies miss these customers dearly because they usually came from the Revolvers group. Credit card companies often try enticing these former customers with special incentives to bring them back.

Credit card company’s perspective: The goal of credit card companies is to add more Revolvers and Max Payers to their books. These two groups of customers are the most profitable customers to have. In fact, credit card companies make so much money from these two groups that they will gladly give away t-shirts, store discounts, and pay commissions to “bribe” people to sign up for credit cards. They know that enough people will eventually fall into the Revolvers category to allow them to write off the less profitable customers such as the Deadbeats and Arbitragers.

Which type of credit card user am I? I am a Max Payer. You better believe that if a charge goes on my card, I have the cash to pay for the item in full. If I don’t have the cash, I don’t use the card. It is as simple as that. Which type of credit card user are you?

Tomorrow, I will write about these same types of credit card customers form the customer perspective.

Note: The names for the first three types of credit card users came from a presentation on problem-solving that was given by Barry Nalebuff, a professor at Yale School of Management. In this presentation, Barry briefly used an example of the credit card industry and how they attract new customers. Based on my personal observations of the credit card industry, I expanded the list to 5 types of users and filled in the blanks.

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About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

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  1. Punny Money says

    I’m a Max Payer and Arbitrager. I pay with credit to earn 2-5% rewards, and I borrow tons at 0% to make free interest.

    I suspect all of the 5% reward cards for specialty categories will go away soon and be replaced with 3% cards since that’s the approximate break even point for card issuers.

  2. Dave says

    There seems to be some confusion in the names. According to cardweb.com & other sources the MAX Payer (# 1 above) is really known as a deadbeat in the credit card industry. This is b/c they make less profit from them.

    #3 (although a deadbeat in real life) is a criminal committing credit card fraud (possibly ID theft too), which is a felony in most states. They should be called what they are…Losers, Jackasses, A-holes, etc, b/c they screw it up for the honest people.

  3. Ryan says

    Punny Money,

    I’m sure you are a preferred customer at every credit card company! 😉 I think the 5% offers may stay around awhile, but only for introductory periods. They are used to entice people to sign up and spend more money.


    These are the names I used, not something I took from cardweb.com or any other site. I agree with your second point, criminals ruin it for the honest people and drive up our costs, and drag down credit card company profits. Some people may say “screw the credit card companies, they deserve it,” but I don’t think that is the right answer. Besides, now that some of them have already or will go public, profits matter to a lot more people than they once did.

  4. Cerebro says

    Hello: I did not understand the 4th group, the Arboitragers; could Ryan or someone else explain how it works ???

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