How do you think credit card companies continue to grow even if there are thousands, if not millions of their card holders who do not meet their honest debts on a monthly basis?
Simply because they are not losing anything in this particular business and as a matter of fact, they are in the winning end of this business.
Take for example the Mastercard. This credit card company has become one of the top tier credit card companies in the world and still, this is a business strategy of MASTERCARD.
How come it doesn’t lose anything when most banks and financing companies that are partnering with them usually ends with at least one or more bad creditors?
That is because 1.) they are not actually losing anything, and 2.) they have already learned from the past and thereby have insured whatever credit line they give their patrons.
So how does a credit card business works if it is among the best business strategy of MASTERCARD? Here is how:
1. Selling credit limits and lines is all credit companies do. The equivalent and actual money that comes with every approved card in the card holder’s name is being paid for by a credit bureau.
This bureau is a group or an association of credit firms and companies who share stocks for the business.
Therefore, the credit limit that a card holder uses to pay for his or her bill or groceries or for the food he consumes in a restaurant is not from the bank or financing company—alone—but from the credit bureau.
Your bank or financing company is only your recommending party to the bureau, so you can be provided with the benefits of having a credit card.
If you don’t pay your debts then, you have actually no financial obligation to your bank but because they are the ones who worked for your credit to be approved, you should not damage that reputation and pay your debts.
2. Selling credit limits and lines is a business strategy of MASTERCARD. With the hundreds if not thousands of banking and financing businesses these days, you may have not chosen Mastercard to take care of your financial securities and business.
But because they offer a lot of services, including credit lines in a card, you can give it attention and eventually choose it amongst the very many leading and top tier banks and financial institutions that are trying to earn your attention.
Clearly then, this is a viable business strategy of MASTERCARD. But you are also in good hands because of the very many services that Mastercard offers its millions of users and business partners.
In fact, it is one of the few credit card companies that have many supporting merchants around the world. This allows you to enjoy the best products and promotions of these merchants anywhere in the world without necessarily having cash on hand.
Also, Mastercard holders are usually provided with extra services and rebates by some of its supporting merchants.
See, this is the branding strategy of Mastercard.