How MasterCard makes money is a story of the success of an idea. MasterCard began life 1966 as a non-profit association, the Interbank Card Association, between banks. Interbank Card Association became Master Charge in 1969 and MasterCard in 1979. It slowly grew its concept and market share until becoming the world-spanning giant it is today. MasterCard makes its money in what some consider the easiest way: by making other people even more money.
MasterCard's money comes from taking a small percentage of the money other companies make using their brand. A bank that issues a MasterCard credit card charges cardholder's interest, annual fees, and late fees. MasterCard gets a piece of those fees. MasterCard also makes money off of the merchants who accept MasterCard, collecting a percentage of each purchase made with a MasterCard. The individual amounts aren't very large, but when you consider that MasterCard transactions totaled 5.9 billion in 2009, it adds up to real money.
What does MasterCard do to earn this money? It's all about convenience. MasterCard facilitates the communication about debt. When you swipe your card, the credit card machine transmits data via MasterCard's system. Without a credit card company like MasterCard, accepting credit and debit card payments would be much more difficult and costly. That convenience motivates people to spend more, which means more transactions for each bank and merchant. This increased spending far outweighs the one or two percent of the overall income they turn over to MasterCard.
Bartt Brick, Member Master Card Advisory Board (ret)
Nilson Report on Credit Card Usage, 2010
What Others Are Reading Right Now.
What Your Jeans Tell Her About You
You might be little spoon or perhaps a Belieber. Or, if you’re lucky, one popular country star.
15 Women Confess the One Thing They’d Never Admit to T...
"I masturbate any opportunity I get when he is not home.”
Why Most Men Should Never Wear Timberlands
Unless you're doing some sort of manual labor, say goodbye to these boots.