Why do people with bad credit tend to get high interest rates?

United States
March 23, 2009 10:42pm CST
How will the bank make a profit from someone with bad credit if the person with bad credit won't be able to pay back the full amount wouldn't the bank end up with less money then they loaned. Do the banks really think high interest rates will encourage someone to pay back the full amount on time? I don't understand. Please enlighten me.
1 response
maezee
@maezee (41997)
• United States
24 Mar 09
It is kind of backwards. But if you think about it, credit card companies are EVENTUALLY going to get the cash that they're lending back, whether it is over minimum payments over a longer period of time or through their collections department.