how much do visa and mastercard make?

melancholly

i just wondered how visa and mastercard make their money. do banks pay them an amount per customer for using the cards, or do they take an amount of the interest that customers pay? i assume that they do make lots of money - mastercard advertising that you can win holidays suggests that! not really a 'money saving' question, i know, but i just wanted to know how it all works!

Karl.H_2

Well, every purchase made on a credit card costs the retailer 2.5%.
So, spend £1,000 and the shop has to pay Mastercard/Visa £25.
Hope this helps.

P.S. The 2.5% is already included in the £1,000.

simongregson

Mastercard and visa are owned by their member banks, so in essence they don't make a profit, but pass on revenue from transaction fees to their participating banks after deducting costs and investments. The % fee depends on the card type.

When you pay interest, you pay directly to the bank which has issued your card, i.e. Lloyds, not mastercard etc.

kavomix

I thought Mastercard & Visa charged 1% on each transaction.

So we all know the shop gets charged from 2-3.5% depending on volume of transactions they put through, mastercard/visa take about 1%, the issuing bank take a cut, and so does the merchant who provide the system and software for the shop keeper to accept the credit card

So both visa/mastercard will advertise and offer freebies so you use their card thus make them money and they give away a prize! aint they nice

Karl.H_2

They have to make a profit to maintain their system. I have quoted the 2.5% from Martin's book – The Money Diet (2005) – on page 361. The card companies make their profit from interest and fines.

Rafter

Mastercard and Visa were both owned by the banks and operate the computer systems that enable banks to settle the payments and charges between themselves as well as spending loads of money on advertising!

Mastercard is now a public company and floated last year.

Both systems receive money each time one of their cards is used and processed through their systems.

The amount retailers pay though depends on the bank that operates their credit or debit card terminals.

The charge will vary depending on the risk that the retailer will go bust, how much business they do and whether they pay for their terminals or pay a percentage on all the transactions.

So supermarkets pay less than 1% and some travel companies and restaurants can pay 5%.

Visa and mastercard receive the same amount whatever.

A certain percentage of what the retailer pays (usually about 1%) will also be paid to your credit card company. This is to cover the cost of processing the transaction, issuing statements, collecting and processing the payment, issuing the card, fraud costs and 0% on purchases.

1% isn't usually enough to cover these costs, which is why credit cards have to charge customers who borrow high rates of interest and penalty charges.

It is also why card companies don't generally care about losing your business if you pay your balance in full!

R.