How does SBI Cards profit from SBI Cashback holders?

[champaklal]

Everyone I know who uses this card easily recovers the joining fee and gets a good amount of cashback.

Moreover there are many superusers who max out the cashback.

So over the MDR of ~2% how does the company profit from this (since they are giving 5% for online spends) ?

 

[Riya Sharma]

Everyone I know who uses this card easily recovers the joining fee and gets a good amount of cashback.

Moreover there are many superusers who max out the cashback.

So over the MDR of ~2% how does the company profit from this (since they are giving 5% for online spends) ?

Stop believing the fake narrative that banks are loosing money on their credit cards. If even 5% of the people who own a credit card from a bank all are unable to pay their complete bill every month they will easily make enough to cover the amount they loose over this cashback.

I guess this is not true for SBI but in other banks people who would pay with cash are now keeping lakhs in the account so that they can pay that bank's credit card bill at the end of the month. Which means that bank can easily lend that money out to other people.

 

[Tensor]

SBI Card make 51% of their profits from late payment fees and interest. This explains the whole business.

 

[rams]

Everyone I know who uses this card easily recovers the joining fee and gets a good amount of cashback.

Moreover there are many superusers who max out the cashback.

So over the MDR of ~2% how does the company profit from this (since they are giving 5% for online spends) ?

Read their annual report to understand how they make money. It provides precious numbers.

 

[bugmenot]

The profit of SBI Card doesn't depend on Cashback card. It has other 30-40 cards, giving a ballpark number.

 

[champaklal]

The profit of SBI Card doesn't depend on Cashback card. It has other 30-40 cards, giving a ballpark number.

That doesn't mean they'll burn money for running that card right.
They'll definitely be making money out of the Cashback card as well.

 

[bugmenot]

That doesn't mean they'll burn money for running that card right.
They'll definitely be making money out of the Cashback card as well.

SBI Card is not a typical startup depending on VCs to burn money. I am pretty much sure it is not in a bad shape due to SBI CB. I completely agree SBI CB card is too good to be true card in terms of cashback.

 

[percolate]

Their cashback card is one of their strategies to gain new customers

 

[HOME_CARDER]

Not everyone is disciplined and punctual enough with their payments. SBI CB card is their bait (FOMO) to attract customers, making a profit off late fees and interest charges. Often, just one late payment or EMI conversion is enough for them to recover their cashback expenses. As a purely credit card company, they seem to be operating on a high-risk, high-reward strategy.

 

[Heehaahee]

5000 rupees is like the complimentary salt that comes with the peanuts for SBI cards..

 

[ragveer]

do not worry if SBI is going into loss because of CB card they will devalue it bank will not get closed