If you have a credit card, you may not be familiar with the terms "revolver" and "transactor". These are two types of credit card users that banks categorize based on their payment behavior. Revolvers are those who carry a balance from month to month, paying interest on their debt. Transactors are those who pay off their balance in full every month, avoiding interest charges.

You may think that banks prefer transactors, since they are more responsible and less likely to default on their debt. However, the opposite is true. Banks actually make more money from revolvers, since they generate a steady stream of interest income for the bank. Transactors, on the other hand, only provide the bank with a small fee from the merchant every time they use their card.

According to a study by the Consumer Financial Protection Bureau (CFPB), revolvers account for 43% of credit card accounts, but they generate 86% of the total interest revenue for banks. Transactors account for 29% of accounts, but only 2% of interest revenue. The remaining 28% of accounts are dormant, meaning they are not used at all.

This means that banks have an incentive to encourage customers to become revolvers, or at least to keep them as revolvers. They do this by offering rewards, cash back, and other perks that entice customers to use their cards more often and spend more than they can afford. They also charge high interest rates and fees that make it harder for revolvers to pay off their debt.

The CFPB warns that this practice can lead to a cycle of debt for consumers, especially for those who are financially vulnerable or have low credit scores. The agency recommends that consumers be aware of the costs and risks of revolving credit, and that they seek out lower-cost alternatives if possible. It also advises consumers to pay more than the minimum payment every month, and to avoid using credit cards for cash advances or balance transfers. The bottom line is: Use your credit cards EVERY month (I tell clients for something they already need, like gasoline) , but pay them off too.