More about how credit cards work

More about how credit cards work

Posted Oct 5, 2003 17:56 UTC (Sun) by torsten (guest, #4137)
In reply to: More about how credit cards work by giraffedata
Parent article: Software suspend work funded

"I managed a small California store that took credit cards a few years ago. We got just about the highest rate possible for a brick and mortar store, and on MC and Visa it was 3%. "

Hmm, in 1995 I paid 6% for MC/VISA. I was really a "little guy" (one-preson business), so I guess I got screwed. :)

"The bank does pay part of its fee to the organization named on the card (the "sponsor"). This is not a kickback. A kickback is like a bribe - a payment for betraying a trust. This is simply a commission for providing a legitimate service -- selling the credit card account."

Question is, if you manage to sell a credit card account, which the credit card holder retains for the term of his life, then should the sales organization receive a commission for the life of the customer?

It's hard for me to justify that. The people who sell credit cards receive a one-time commission or hourly wage, but the sponsor receives a commission for a very long time. The value of the long-term commission is very high, however the organization does not provide any ongoing service which would justify the ongoing commision - a one-off commission is more appropriate.

Therefore, I believe this ongoing payment plan, which the consumer pays for without receiving additional benefits, is not as legitimate as it sounds. Kickback just seemed a nice word to describe it.

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