What if... A credit card offered 6% return on money you over paid on your balance

[mrpaseo]

I was just pondering...

What if I had a credit card at a 9.99% fixed interest rate. My credit card limit was $10,000. (Arbitrary numbers).

If I have a zero balance, but over pay the cc by $1,000 dollars. This would put $1,000 dollars in the pocket of the cc that could use to loan out to other customers at 9.99% interest. They could in effect give some pretty good rates of return to their customers that hold a balance in their pocket such as a pleasant 6% return on my $1,000 dollars.

There is probably a law against this somewhere right?

Ray

[mrpaseo]

BTW I understand most cc's are issued from banks.

This thought stems from the idea of not needing/wanting a credit card. How many people out there are financially stable, maintain high FICO scores and do not need a credit card... How can the cc peeps tap into these people.

Better interest rates for higher FICO scores?

Ray

[Gjowers]

I'd say sign me up for that!

[johmi]

Did you consider that a lot of people never pay back their credit card debt?

[disneysteve]

That would be nice but I don't think it will ever happen. If they started paying interest like that, I think it would make them subject to all kinds of banking regulations that don't currently apply to them.

I also don't think they'd pay 6% if they were collecting 10%. They'd probably want a bigger spread than that. Would be nice, though. I'd be happy to park cash in my CC account earning 6%.

[boosami]

What you are describing is any interest bearing bank account. The money you deposit is used to lend to other bank customers.

[disneysteve]

Originally Posted by boosami

What you are describing is any interest bearing bank account. The money you deposit is used to lend to other bank customers.

True, but banks aren't generally charging borrowers the high interest rates that credit card companies are. A bank may pay 2% and charge 6%, but a CC could pay 6% and charge 15%.

Years ago, Discover basically did this. They had free cash advances so I would do a 10K cash advance and deposit the money in Discover Bank, earn interest until my bill was due and then repay it.