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Mastercard Profits Up 70%, Who Is To Blame?

You are. Well, maybe not YOU per se, buy the general “you” out there.

The world’s second largest credit card firm made a profit of $214.9m in the first three months of 2007.

Now might be a good time to re-evaluate your spending patterns, making sure you have the lowest interest rate humanly possible, you pay your bill in full each month, and you are using a reward card that makes them pay YOU to use their card. Seriously…$214 million in profit in 3 months, most of it coming from people that A. carry high balances and B. use their card overseas. Which, by the way, I think is crap.

Do you really want to give them even higher profits next quarter? I didn’t think so…


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Comments (5)

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  1. formertexan says:

    MC makes a boat load off of hidden fees that most don’t know about and the interchange fee is one of the biggest profit makers. Consumers don’t realize that retailers are raising prices to keep up with the rising fees that are charged every time a customer swipes a credit card. I’m working with UnfairCreditCardFees.com to fight for a more competitive environment with increased transparency of the credit card industry.

  2. shawna says:

    wow…in only 3 months. That is truly nauseating.

  3. Scott says:

    You’re reading too much into this. First of all, Mastercard’s profits have nothing to do with people carrying high balances. The balances are with the issuing bank…the bank is the one that profits from interest payments. MC makes money by charging a fee equal to a very small percentage of each transaction amount. This fee is paid by the merchant, not the consumer, in exchange for being able to accept payments from cards in the MC network.

    The reason that MC’s profits have risen is that they have really been pushing consumers to get used to using their cards for their typical small (

  4. Scott says:

    You’re reading too much into this. First of all, Mastercard’s profits have nothing to do with people carrying high balances. The balances are with the issuing bank…the bank is the one that profits from interest payments. MC makes money by charging a fee equal to a very small percentage of each transaction amount. This fee is paid by the merchant, not the consumer, in exchange for being able to accept payments from cards in the MC network.

    The reason that MC’s profits have risen is that they have really been pushing consumers to get used to using their cards for their typical small (under $20) purchases, such as a cup of coffee at Starbucks or lunch at McDonald’s. Transactions in the under $20 range are still overwhelmingly paid with cash, so there is a lot of potential for growth there for MC, Visa, etc. MC made some big strides this past quarter by focusing on that market. Also, much of this profit came from debit card transactions, not credit card transactions. (I think your post tried to imply that this is some sort of predatory lending issue, trying to get consumers to use too much credit, but it’s not.)

    Personally, I think this is a good thing. I prefer using my debit card for as many transactions as possible, because it helps me track my spending a lot better. I hate carrying cash…too easy to spend and forget about.

    By the way, the main critics of these interchange fees are Wal-Mart and large grocery store chains, who tried to sue MC/Visa over them. That’s why when you use your card there, their terminals try to trick you into selecting “debit” rather than “credit” so they can avoid the fee. However, unless you’re getting cash back, it’s better as a consumer to use the “credit” option on your debit card.

    Anyway, I don’t see why MC making a profit is a bad thing. Frankly, their service adds a lot of convenience. If a store doesn’t want to pay their fees, it doesn’t have to accept their card…and I’ll be happy to shop somewhere else that does. Now if you want to complain about banks profiting off interest from customers who can’t pay off their credit card balances, that I can understand.

  5. formertexan says:

    Hi Scott, It’s a good practice to use your debit card as opposed to the “credit” option.

    Small businesses are hurt the most by these fees, especially convenience store owners and even cab drivers feel the effects of interchange fees.

    I don’t have any problem with mastercard making a profit. The credit card industry makes over $30 billion a year off of these fees adding hundreds of dollars in more costs to family budgets. That’s the issue I have. I’m asking for a little disclosure so we know how much we’re paying in interchange. That shouldn’t be too much to ask.

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