Before you can know the answer to this question and learn how credit card companies actually make their money, we need to take the time to dispel certain myths about credit card terms and credit card debt. Canadians have had it up to here with false promises of debt settlement in times of high unemployment and rising credit card defaults. We hear things like, “It is really easy to get your credit card balance cut in half”. If it were that easy, banks would be going broke because everyone would be trying to get away with paying just half of what they owe. Because of the large number of people who are trying to get their balances reduced, it is simply not happening. Sometimes it does happen, but you need to have a good reason for wanting your debt reduced, such as job loss, medical issues, divorce, and others. If you are making enough money to cover your debt regardless of these issues, you have to cover it, period. Nobody is going to make an exception for you. There is also no such thing as repeated debt settlement.
Many believe that when you cannot afford to make your credit card payments, declaring bankruptcy or settling debt are your only options. Options always exist. If you are facing financial difficulty, you may reach an agreement with your credit card company to make smaller payments or no payments for a given term. Interest, however, is still charged. This temporary exemption results in you paying a lot more over time. This is one way they do make you pay more.
If you go to a debt settlement company, they will most likely charge you a fee, so you start owing them money too. The more in debt you are, the deeper in debt you plummet.
Another way credit card companies make money is by offering short or no grace periods. At first, grace periods lasted up to one month. Currently, it is 21 days on average. Since this is not making as much money as they hoped, the outlook is for shorter and shorter grace periods, bordering on none at all.
All late payments bring a penalty, even if you are less than one day late. Companies that work mostly online are making a fortune from this. The payment processing cost is the same regardless of whether the payment is late or not; so, this is not costing them more. Whatever the processing cost is, the profit more than makes up for it. A late payment can lower your credit score, in some cases leaving you no choice but to apply for bad credit loans.
At any rate, do not do business with companies that do not offer any grace period. They make you start paying interest the minute you charge something to the stupid card. Everything you are paying is actually costing you more. Credit card companies always make you pay more, and it could not be any other way because of the fundamental premises of the issuer-client interaction. The company wants you to keep making payments, and you do not. And you have agreed to their terms.
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