Why a Smart Consumer Is a Bad Credit Card Customer

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And how you can be punished for responsible behavior: In some cases, credit card issuers have rejected applicants who have credit scores that are too good (sometimes over 800). Why? Because these consumers typically pay bills in full and on time, they’re unlikely to make the credit card companies much money.

In light of new federal regulations that restrict credit card penalty fees and sketchy billing practices, along with newly vigilant consumers who are desperately trying to pay off debt and are reluctant to shop like it was 2007, Washington Post investigates the new strategies that banks and card issuers are utilizing to replace lost revenues. Some have added or raised annual fees, and many have scaled back on rewards and raised interest rates and cash advance rates.

There has also been an effort to get rid of bad customers. What customer qualifies as “bad”? One is the type you might expect, the one who is deemed a bad risk because of a history of paying off not paying off debts. The other “bad” customer may seem more surprising. From the WP story:

In a lawsuit filed last month, outdoor retailer Gander Mountain, based in Minnesota, claimed that its credit card partner, World Financial Network, was turning down shoppers with nearly perfect credit scores of 800 or above. Gander Mountain said the reason was that the issuer said it could not make money from those clients, which World Financial Network estimated as about a quarter of new applicants.

That’s right: A good credit score can peg you as a bad client.

I know the banks and credit card companies are extraordinarily good at making money, but this just seems like a really bad business model.

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