VattenÃ© wrote:That raises an interesting question. One's credit situation and history with the company are no doubt huge factors, but I wonder if credit card companies are more inclined to lower APRs of customers that routinely pay in full. The people carrying balances are profit centers. Plus they're already currently obligated to pay back a certain amount, so what incentive do they have for lowering an APR? The PIFers, on the other hand, aren't earning the credit card companies any revenue from interest, and if they have a history of always PIF, perhaps they're assumed to not likely start carrying balances. I would think the issuer has much more incentive to lower these APRs. They aren't currently carrying balances and using the APR, but if it was lower maybe the customer would choose that card if they ever did need to carry a balance.
There are some complicating factors. I have a PIF history, so lenders will expect me to not carry a balance. If I do carry a balance and pay interest, it will only be the result of my lack of attention. So I'd expect a lender to milk me for as much as they possibly can on those rare occasions. Chase, for example, can calculate that I'd probably not give up the Freedom's 5% categories as a result of having to pay them a late fee once or twice. Since I earn a lot in rewards and don't pay interest, they find it rational to pick up the fees wherever they can, and there is not really any incentive for them to be flexible. Some customers will be irritated, but Chase can calculate that on average, most customers will remain as long as great rewards outweigh the occasional fee.
On the other hand, if I have average credit, little in the way of available cash, and expect to carry a balance and pay interest fairly often, then I've got an 'interest payer' label on me. I'm going to be profitable for some bank, regularly paying interest, so there is a clearer incentive for issuers to compete for my carried balances. If I can see that I'm going to pay $1000 in credit card interest to Bank X in the next year, then there is an incentive for me to shop around for a 0% rate. If X is charging me 14%, and X and I know I have a fair possibility to pay 10% elsewhere, then X is perhaps more likely to lower the APR. X might rather earn 10% on my balance than 14% on no balance.
I don't think this extends to people with bad credit, though. If someone can't qualify for a card like a Slate, then there's very little competition over the APR.