Credit card signups is it a loss?

Their gains is not monetary but in marketing, reputation and customer base etc.

Hi Mui Ling,

In short, yes the banks will lose in my opinion if 100% of the folks all made timely payments.

However, I think just based on 80/20 rule, imagine 20% of the folks defaulted on their payments and suffer a ridiculous 25% interest debt (which I believe is a reality in modern society), the banks would not lose from a net-net perspective.

It's not a loss because by casting their nets far and wide, and gaining traction, credit card companies will earn back their investments in the Long run

Hi Mui Leng,

It's widely acknowleged that the sign up will be a loss, but the banks are willing to absorb this loss as it is a method of letting the banks achieve a broadening of their client database. Amongst these new clients obtained, there will be a small majority that will engage the bank for other services such as loans, which is where the banks expect the recoup the money spent on acquiring new customers.

So in short: Yes, the credit card division is not likely to turn much of a profit, but there will be far more to be made in other segments of the bank's services.