<prompt> Human: There seems to be a balance between banks lending credit to consumers. If everyone paid their bills on time, would that really benefit banks just with charges they make from acquiring fees merchant charges?Do you think banks prefer that everyone pays their credit card bills on time? If not, how do they balance between making interest from credit card users vs avoiding charge offs people who never pay it back?Assistant: This isnt a personal finance question. Its a business question. Having worked in the industry, the reality is that not everyone pays on time. There is a risk metric and algorithm applied here, and while it sounds counter intuitive, if youre not giving out bad loans, youre not doing this right. Banks do want some percentage to default. This is how most consumer and commercial credit facilities operate, a risk metric is applied and considered. To your last question, again, they use an algo to balance what they believe they could collect win back, and what they will charge off, make a few pennies on the dollar selling it and the rest write down on their tax return. Human: they use an algo to balance what they believe they could collect win back, and what they will charge off, make a few pennies on the dollar selling it and the rest write down on their tax return. Wait...what? Credit facilities can use charge offs to reduce the taxes they pay to the government?  <response>: Yes, on the firms income statement, it can be written off as an expense due to it being uncollectible. The world of debt financing and structuring is very complex. This does, however, lower the banks operating profits. This is called Net Charge Offs. 