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[quote=Anonymous][quote=Anonymous]I once asked the same question of someone I know who works for one of the major CC companies. She said there's some kind of ratio the companies need to maintain (forget specifically what, but something like the overall outlay of funds vs the amount of money owed to them) and the "pay off in full each month" people help them get the better ratios. If they are owed too much money, their company's standing gets downgraded or something like that.[/quote]

Pretty close, although it's a bit of an over simplified explanation. Credit card companies do make money off of people who pay in full, although less than those who carry a balance. But, as your friend alluded there are two or three benefits to this group of people, first, they are less likely to charge off in a downturn (so thy are lower risk) and help soften the fall when economies go south, second, because they tend to pay off in full, the amount of debt that has to be serviced is lower than it otherwise would be (this is similar to the ratio argument your friend makes) and finally the ratio argument: banks are required to keep a certain ratio of assets to liabilities - that's why you often see banks pushing you to open checking accts with your loans (and because obviously they make money there too). It isn't so much that you get downgraded if you don't meet the ratios - they are regulatory - so it's not a choice, it's more that your ability to expand your lending operations would be curtailed[/quote]

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