Become your credit card's nightmare customer

Here's a fact you probably know, but is still sobering to see in black-and-white.

"Credit-card companies make most of their money by charging interest to customers who don't pay off their balances each month." (The Wall Street Journal, "Credit-Card Firms' Problem: People Are Paying Their Bills," May 25, 2006)

Times are tough for credit card firms these days, the article said. More people, in fact, are paying off their balances, shrinking the companies' revenues and profits. To make up the difference, card firms are increasing late-payment fees and raising rates. They are also launching new technology designed to get you to use your card more often.

The bottom-line: Your credit card company makes more money when you spend more than your income. They have a strong incentive to get you into debt, and keep you there. Now that's "priceless."

Be wise. Instead of doing your part to help the poor, suffering credit card firms, be like Jim Raley. Jim, a 34-year-old from Atlanta, once racked up $14,000 in credit card debt and paid hefty interest. Now he pays his balance off each month, keeping more money in his pocket instead of the card companies'."I am one of their nightmare customers," he said in the WSJ article. (Note: credit card issuers aren't completely hurting; they still rake in transaction fees from retailers every time customers use their card.)

More people paying off their card balances is news that isn't necessarily as good as it sounds. Many pay with cash from a home equity loan, where interest is tax-deductible, or transfer balances from high-rate cards to those with temporary 0% interest. While that helps save a few dollars, it's still borrowing from Peter to pay Paul. And Paul is smiling all the way to the bank.