Asked by luigirovatti (2836) October 23rd, 2021
2 responses
“Great Question” (0)

The description is the following:

”Every year, credit card companies issue millions of credit cards. The more cards they make, the more money they make. Of course, the more cards they issue, the greater the chance they’ll extend credit to the wtong people.

Credit card companies make their money by charging high rates of interest and high fees to high risk cardholders. The trade off is they know lots of those people won’t pay. Sure, they make a cursory effort to collect the debts, but they give up quickly and write them off their taxes. To cover their losses, they buy insurance. Since they have insurance, they won’t miss yhe money. The carrier will welcome the theft.

Insurance companies make money by selling policies, but they can only sell them if people fear a potential loss. If no one ever stole from credit card companies, there wouldn’t be a market for insurance. No market for insurance means no premiums. So rather than being upsey, insurance companies welcome a bit of theft because it allows them to get rich. They won’t miss the money, because they’ll just raise their premiums to get the money back. It’s back to the credit card companies, but they don’t care about premiums. They pass those on to customers in their fees.

In a way, the cardholders get hurt, but these premiums get spread over billions of cardholders, each of whom knows what fees they need to pay to get and keep the card. If they think the fees are too high, or they aren’t getting a good deal, they can cancel the card.”

Topics: insurance, work, money, credit, company, bank