How Customer Can Gain Instead of the Bank While Using Credit Card

This is a common question among financially savvy consumers. The goal of making profits instead of allowing the bank to do so while using its credit card, in a legal and ethical way, is essentially the strategy of maximizing your value extraction from the card's rewards and benefits while ensuring the bank collects zero revenue from interest or fees on your account.

Banks primarily make money on credit cards through below major sources, and your goal is to eliminate these:

1.  Interest Charges: (Biggest revenue source)

2.  Fees: (Annual fees, late fees, over-limit fees, cash advance fees)

3.  Interchange Fees: (A small percentage fee paid by the merchant on every transaction, which the bank shares a portion of with you as rewards).

Here is the strategic approach for maximizing your benefits (Interchange Fee rebates) while costing the bank revenue from interest and fees:

1. Eliminate ALL Interest Revenue

This is the single most important step to minimize the bank's profit from your account.

Rule: Pay your full statement balance on or before the due date, every single month.

Why it costs the bank: The bank makes the most money from cardholders who carry a balance and pay high APR interest (often 20% or more). By paying in full, you make use of the card's interest-free grace period, and the bank earns zero from this primary revenue stream.

2. Eliminate ALL Fee Revenue

Avoid all unnecessary fees, which are pure profit for the bank.

Rule: Avoid all late payment fees, over-limit fees, cash advance fees, and foreign transaction fees (by using a card that waives them).

Strategic Annual Fee Management:

Choose a No-Annual-Fee Card: The most direct way to eliminate an annual fee is to simply use a card that doesn't charge one.

Offset the Fee: If you use a premium card with a high annual fee (e.g., \$500), ensure the value you get from the perks (e.g., complimentary travel credits, free night certificates, lounge access, statement credits) is significantly greater than the fee. If the card costs you \$500 but gives you \$1,000 in benefits you would have bought anyway, you are extracting value.

3. Maximize Interchange-Funded Rewards

Your rewards (points, miles, cashback) are mostly funded by the interchange fee (a fee the merchant pays to the bank). Your goal is to get a greater share of this fee back as a reward than the bank is typically willing to pay out.

Use Category-Matched Cards: Use the right card for the right purchase. If a card offers 5% back on groceries and 1% on everything else, use it only for groceries. The bank earns a standard interchange fee (usually 1.5% to 3.5%), but they are paying you 5%, making that transaction less profitable for them.

Example: Use Card A for 5% dining, Card B for 3% gas, and Card C for 2% flat-rate everywhere else.

Chase High Sign-Up Bonuses (Safely): Banks offer massive welcome/sign-up bonuses (SUBs) that are often worth hundreds of dollars in value, requiring you to spend a certain amount in the first few months. This is a deliberate loss-leader for the bank.

The Strategy: Time the opening of a new card to coincide with large, pre-planned expenses (taxes, insurance, home repairs) that you can easily pay off immediately, thereby securing the large bonus without overspending or carrying a balance.

4. Redeem Points for Maximum Value

The bank assigns a fixed "cash" value to your points, but often allows you to redeem them for a higher "travel" or "transfer partner" value, creating a higher liability for them.

The Strategy: Look for opportunities to transfer points to airline or hotel loyalty programs (e.g., converting 100,000 credit card points to 150,000 airline miles), where you can redeem them for a premium flight or hotel room that would cost you much more cash.

Example: 50,000 points redeemed for a \$500 statement credit (1 cent/point) is less valuable to you than redeeming them for a First Class flight that sells for \$1,500 (3 cents/point). You are extracting 3x the intended value from the bank's rewards pool.

5. Utilize Free "Coupon Book" Perks

Many premium cards offer statement credits for specific services (e.g., travel, streaming, dining, cabs).

The Strategy: Only use cards whose free perks are for services you already use or were planning to purchase. If you would have paid \$15 for a streaming service anyway, the card giving you a \$15 credit is 100% extracted value from the bank. If you use the perk to buy something you didn't need, you are still losing money.

By paying in full, avoiding fees, strategically using the highest-return cards, and redeeming points for outsized value, you become a "transactor" who is highly profitable for yourself but unprofitable for the bank's traditional business model (which relies on interest and fees).

Note: This article is generated by a free to use AI model.

Customer Reviews: Why I Uninstalled CRED App

I was using CRED for over a year. I had heard about it from some friend and checked it out. The mobile app had a unique proposition: it allowed us to pay all credit card bills from single interface and it also gave some offers and ‘cash-backs’. When I logged into CRED for the first time, the app had already pulled one of my credit cards there and it was surprising (read scary) to me because of data privacy concerns. Still I listed my other credit card and thought to give the app a chance.

An interesting thing to use in CRED is the “CIBIL Score”. It is our credit score and using CRED we check our score for free any time. And then there were offers. When we pay credit card bills, we earned ‘coins’ which we can use to buy offers with discounts. I took a Uber coupon initially and later on I was not able to find any good offers. Most of the offers of up to 50% discounts were from unknown niche brands. I did not want to buy a new brand just because it offered discounts. Hence I started ‘encashing’ my ‘coins’ (reward points). But as per the algorithm, the cashbacks were very less. Mostly those were like only Rs 7 or 14. I waited for a few months and then gave up. I decided to quit CRED for a simple reason. The risk reward ratio was too less.

Whenever we install a new app, there is always a risk. Financial apps would definitely pose more risk. We are giving away important data like our credit card bills pattern every month and what kind of offers we are taking. It helps create a customer profile where the company can know us well. And then it can target ads to us and also if there is any data leak or data may be unethically sold to other companies. For paying credit card bills, very simple methods already exist – auto debit from net banking is one, or we can choose to pay a card from net banking of any bank. Therefore since the rewards were not attractive enough and the risks were high, I decided to quit. CRED team was helpful and they deleted my account after my request.

But before I deleted my account, I converted whatever unused ‘coins’ I had for charity. I converted the coins into ‘saplings’ which would be planted by CRED on my behalf. This is a noble feature from CRED.

My advice would be that if you are finding the CRED offers useful and if you are using those offers very often, then you can keep using CRED. Otherwise I am not in favor of giving away our data to any financial app which is not necessary and can be avoided.

- Rahul Tiwary