While the word “deadbeat” has all the negative connotations of a bum, you may be surprised to learn that the credit card industry sometimes uses the term differently.
For them, a credit card deadbeat is someone who pays their statement balances off in full and on time every month.
Deadbeat in the Eyes of a Credit Card Company
Since credit card companies make money off the extremely high interest rates they charge on unpaid balances, customers who pay their balances in full are considered not as unprofitable.
While credit card companies still earn some revenue from the interchange fees they impose on merchants, their profits on these fees are tiny compared to the interest rates they charge on unpaid balances. (In 2009, First Premier even charged a ridiculous APR of 79.9%.)
And to these credit card companies, these less-than-profitable customers are sometimes considered internally as deadbeats.
Why You Should Be a Credit Card Deadbeat
Being a credit card deadbeat has many advantages:
1. It saves you money
A credit card is not a free line of money. In fact, it’s dangerous when you make such an assumption and discover too late that you don’t have the means to pay back.
But paying off your balances on time each month means that you avoid paying the high interest rates that can often reach up to 30%.
2. You can take advantage of rewards programs
By being a credit card deadbeat, you can often gain by taking advantage of a credit card’s rewards program.
Earning miles, points, or cash back for something that you’re purchasing is a no-brainer, but only if you pay off your credit card in full each month.
3. You can improve your credit score
By paying off your credit card balances in full each month, you’re proving your creditworthiness to your creditors. This can have a positive impact on your credit score if you keep this up regularly.
Being a credit card deadbeat is advantageous to the average consumer.
By paying off your credit card balances in full each month, you get to avoid the high interest rates while earning some miles, points, or cash back in the process.