Square_Tea4916

Square_Tea4916 OP t1_j72zszx wrote

Businesses operate a bit different than individuals in this sense. The tldr of it is

Investing Activities are expenditures in long-term assets (think things that are depreciating such as cars and laptops).

Financing are things you do in the form of something equitable in order to fund the business. This is like receiving a loan or paying off debt in order to finance your Operations and Investments. Typically re-purchasing their own equity is them essentially buying up their own financing so they can keep more of their dividends as they feel sustainable with their cash on hand in the foreseeable future.

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Square_Tea4916 OP t1_j6qiw0t wrote

Think they can flip a switch to make it easily profitable. Not buying 1-2 players and not offering as high of wages relative to other clubs.

It’s pretty much like an over-valued tech company - high potential and big brand name.

But also hear owners get extremely favorable tax benefits from being owners in a large depreciating asset.

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Square_Tea4916 t1_j49q1ik wrote

They have to spend all that interchange in rewards and partnerships to maintain their customer base. Not to mention all the operational costs in servicing, disputes, and fraud. You can’t run a credit card business successfully on just interchange and be profitable. I don’t know a single bank where interchange outweighs interest even if their entire customer base is super prime.

The truth is… credit cards have become a bet on missed payments and overspending. For every 1 customer who genuinely needed “short-term liquidity” to cover for basic needs there’s 20 to 30 customers blowing stacks on the latest influencer’s merchandise or booking an expensive trip to live like royalty.

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Square_Tea4916 t1_j49bw7f wrote

Assuming you mean a 1% Charge-off rate. Interchange is peanuts compared to what most banks make in fees/interest. I’ve worked at one of the largest Super Regional bank and a global bank spinning up card programs in Europe and North America and can tell you without a doubt the most profitable program is raising credit limits to increase outstanding balances.

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Square_Tea4916 t1_j47si66 wrote

Nice way of saying people are stupid. You’re not wrong.

Assuming they were financially educated and pushing their personal finances to the edge, they’d most likely switch over to BNPL which charges a fraction of the cost for late payments.

Ever notice Credit Cards don’t require you to establish how you’re going to pay and put auto-pay on by default? Can tell you at a major US Credit Card Issuer the rate is LOW for auto-pay enrollment.

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Square_Tea4916 t1_j473p6h wrote

As long as you don’t spend proportionally to your credit limit increase you’re fine. Most banks have a credit limit increase program such that a good percentage of customers will start spending more on their card collecting the measly interchange and some will actually miss payments and go into debt - even more profitable.

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