Things I never knew about credit card companies

Last night my host and friend helped me get my weekend off right with an 18oz ribeye, expensive beer, and good company. After dinner, we sat outside and finished the evening with a bottle of bourbon and a long conversation about personal finance.

My friend and his roommate are employees of a major credit card company, and I enjoyed picking their brains for a while. I ended up learning a few new fun facts about credit card companies, their customers, and their business model that I thought I would share with my readers.

1. Decisions regarding a customer's interest rate and credit limit cannot be affected by a customer's age. If a 90-year-old has a credit score and income similar to a 30-year-old, he must be given the same interest rate and credit limit as the younger customer. This is related to the next point.
2. Because credit card debt is completely unsecured, the heirs of a deceased cardholder are not legally obligated to pay the card's balance. Approximately 90% of the time relatives do the right thing and use the estate of the deceased to pay off the debt. However, they are not legally obligated to. This is why credit card companies would prefer to not give credit to an older customer (fearing they might die). In theory, if someone has some foresight into their own death due to a terminal illness, that person could max out his credit cards and never think twice about it. He could buy a car, electronics, or the entire inventory of a liquor store!
   
3. As we know, credit card companies make their money in three ways: by charging interest on revolving debt, charging service fees (i.e. over-the-limit, returned check, late payment, etc), and charging a small percentage to retailers for each purchase. My friend confirmed that approximately 65% of their revenue comes from interest payments. The other 35% comes from the other fees.
4. If you separate customers into different bands of credit scores (350-400, 401-450, ... , 800-850), higher bands have a lower risk of default, with one exception. The inverse risk of default peaks at around 800 (meaning that a score of 800 indicates the lowest risk), and then moves down just a bit as it approaches until the maximum score of 850 (meaning that a score higher than 800 presents a higher risk of default). They believe this occurs because most customers with a credit score above 800 have had established credit for a long time...a really long time. In fact, they've had credit for so long, they're more likely to die and default on their balances. Though the difference isn't large, it's still an interesting phenomenon.
   
5. Body Mass Index, a standard for determining a person's overweight status, can be correlated with credit score. Essentially, the heavier a customer becomes, the better chance that he will have a lower credit score.
6. Finally, credit card companies are the almost the largest purchaser of envelopes and postage, second only to the federal government.