Today I saw them offering credit cards. Why do companies like this that have nothing to do with finance and where you probably only go once or twice a year offer credit cards?
In: Economics
Two main reasons: repeat customers, and fees on lending
1) Repeat customers: When you have a card with them, you’re more likely to continue to user their service, become a long term customer, and use them over others. This is essentially the goal of any company, to encourage long term customers. Long term customers tend to be a LOT more valuable than new customers. Additionally, having a line of credit allows you to purchase beyond your means, which means you’ll again be more likely to spend more money. Studies and research basically shows, if you have a CC from a company, you spend more money there and become a longer term company. Its a no brainer, its actually surprising we don’t see even more cards available.
2) Lending Fees: Credit card fees and interest can make the company some pretty serious money. There’ a lot of intricacies here about the mechanics of how it works, but suffice to say, there’ a lot to gain from lending money.
Latest Answers