Does success make a good credit card company?

A UK company recently filed accounts reveal a tasty turnover that increased 11 million to 109.5 million at the end of 2009

. The company proudly stated that its credit card programme "was the real driver of profitability".

But does the success of this company (or of any other) indicate that it'd make a good deal for consumers?

Or, conversely, does the fact that profits have risen show that many of the company's customers are in debt and therefore that it's an indicator of a bad choice for anyone doing a credit card comparison?

In this company in particular, the credit card division income increased from 65 million in 2008 to 77.6 million in 2009 but the secret to its success was the competitive edge that keeps its cards in a prominent position in the credit card best-buy reviews.

So, in this case, we could say that it was the greater volume of applications for a particular type of offer that the provider specialised in - for example, 0% balance transfer credit cards - that made the difference.

In other words there was a greater volume of customers as opposed to larger debts (and therefore larger profits) amongst existing customers. So from this we can conclude that context is important when it comes to deciding whether greater profits are good or bad for consumers.

This is not decisive since profits are based on so much internal company business as well but it can be a minor indicator.

Even having taken that into account, though, it seems little basis to choose a credit card provider.

Indicators which are much more useful include independent consumer reviews, the actual offer for the credit card - so clearing debt or purchases will be different cards - and other customer reviews.

However, there are a few occasions when it can be useful to know about the profits of a certain credit card provider

First, in a time of recession it is reassuring to know that a company is profitable and is therefore likely to continue to operate. Even though money is protected by the financial services authority in the even of a bank or lender going bust this is not a simple process.

Second, it can indicate ongoing offers. For example, despite the profits reaped by the company above its card division announced that the larger company won't see any of it.

The money will instead be reinvested into the business instead of paying out dividends to its parent company.

That information, then, bodes well for potential customers as it indicates that more investment will be going into the division. That could include acquiring a banking licence and announcing plans to create a string of high-street banks or it could just mean more offers for new and existing customers.

Does success make a good credit card company?

By: Justin Schamotta

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