Credit Card Interest - Methods and Marketing

Methods and Marketing

In effect, differences in methods mostly act upon the fluctuating balance of the most recent cycle (and are almost the same for balances carried over from cycle to cycle. Banks and consumers are aware of transaction costs, and banks actually receive income in the form of per-transaction payments from the merchants, besides gaining a new loan, which is more business for the bank. Therefore, the interest charged in the most recent cycle interrelates with other incomes and benefits to the cardholder and bank, such as transaction cost, transaction fees to the bank, marketing costs for gaining each new loan (which is like a sale for the bank) and marketing costs for overall cardholder perception, which can increase market share. Therefore, the rate charged on the most recent cycle is largely a matter of marketing preference based upon cardholder perceptions, rather than a matter of maximizing the rate.