There was a time when a “deadbeat” was considered to be a person who failed to pay their bills. In today’s financial world, however, a “deadbeat” is a credit card user who pays off their balance in full and on time every month. The reason they’re saddled with such a derogatory moniker is because they’re successfully avoiding the interest that would have accrued on their accounts, and by paying on time, they don’t incur any late fees. It all boils down to credit card companies not making any money of these so-called deadbeats. They view people who pay in full and on time as reaping the rewards from credit card programs without having to pay high fees or interest. That’s not to say that credit card companies don’t still earn money from deadbeats. One way they make money is that merchants pay about 3% of each credit card transaction in fees to the credit card company. So, if a deadbeat charges $2,000 on their card, the credit card company still makes $60 from them through the 3% merchant fee. Deadbeat customers usually feel as if they come out ahead by using a credit card over cash or a debit card, and because they don’t carry a balance and don’t pay any interest, a rewards card that offers 1% to 5% back on purchases means a deadbeat can rake in about $100 on a $2,000 purchase. For them, it’s a win-win.
