The Business Model For No Interest Credit Cards

The business model for no interest credit cards is based on the practices of the bank or credit card company issuing the card.  No interest credit cards offer a way for issuers to provide a special benefit to their top customers that qualify for these types of cards.  A person qualifying for a no interest or 0 percent interest credit card is able to make purchases on a retail base without regard to interest charges that add to the items overall cost.

Who Qualifies?

It should be noted that not every customer of a credit card issuer qualifies for a no interest credit card.  1 of the important aspects of the no interest credit card business model is that the type of customer receiving this type of card must have near perfect credit in order to receive a card.  As measured by FICO, this would be a score near 850.

Need to Attract Quality Customers

With more and more consumers either experiencing late pays of 30 days or more on their traditional credit cards or reducing the amount of overall debt that they are taking on due to economic uncertainty, why would a bank bother offering a no interest card.  This can be answered by the fact that banks need to attract high quality customers in order to sell other products and services such as those provided through an estate or trust department.  

Without sweeteners such as no interest credit cards, it would be nearly impossible for a bank to compete for the best customers and sustain its profitability.  The business model for no interest credit cards focuses on bringing in those best customers and steering them toward other offerings of the institution.

No Interest Credit Card Offers Should Be Scrutinized

A prospective consumer should look at an offer for a no interest credit card carefully since such offers are not permanent ones.  Reading the fine print should reveal that the no interest period is a limited one or can be changed anytime the customer pays late or goes delinquent in the account.  Interest rate triggers are usually built in the contract as a way for the bank or credit card issuer protect themselves in case the cardholder becomes an adverse risk later down the road.

A person interest in acquiring a no interest credit card should speak directly with their bank or lending institution to determine their qualification for the card as well as any terms and conditions that may cause the card to no longer be a no interest credit card.  Understanding the terms and conditions will eliminate surprises later on and help the consumer and the issuer benefit.