Credit Card Arithmetic

Ever thought about the money involved in the credit card industry?
For rough numbers, let's assume that:

--100 million American families with credit cards

--Each American family has $1,000 of credit card short term loan (the typical total family credit card charges per month)

--Each American family has $10,000 of credit card debt
--The average interest rate paid on this debt is 12% per year
--The credit card companies pay 4% for the money they borrow to cover the consumer debt

Therefore, the credit card companies always have about $100 billion in outstanding credit card debt that they carry at no charge to the customer. To borrow that money for the consumers, the credit card companies are paying about $4 billion per year out of their pockets.

Therefore, too, the American credit card debt is about $1 trillion. Compare THAT to the national debt of $5 trillion or so. It is significant!

To borrow that money for the consumers, the credit card companies must be paying around $40 billion per year. But, consumers are paying $120 billion per year to the credit card companies.

Therefore, the consumers who borrow from the credit card companies and make their loan payments are allowing the credit card companies to net about $80 billion per year, which more than covers the $4 billion they pay for the money loaned to cunsumers who pay off their card every month. And gives them money left over to pay all their operating costs and to cover the charges on stolen credit cards (which is money lost to the credit card thieves).

It is no wonder there are so many credit card companies sending new cards in the mail.