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Credit Card Applications » News » Products » Affluent spending leads to rises in MasterCard purchases

Affluent spending leads to rises in MasterCard purchases

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Affluent spending leads to rises in MasterCard purchases

While many businesses continue to struggle to keep their doors open during what sometimes feels like a never-end recession, MasterCard had an excellent quarter due to increased spending by its wealthy customers and commercial clients.

MasterCard, like its competitor Visa, processes credit and debit card transactions for banks. The more transactions cardholders make the more revenue the companies generate. Most of its profits come from international markets.

The company`s chief product officer, Tim Murphy, said MasterCard is investing a lot more in products and services aimed at its affluent customers because this appears to increase spending volume. There has been a 17% worldwide boost on luxury item purchases. Murphy says the high-income demographic “are spending and the affluent, as you would expect, tend to overperform on volume growth across the entire economic cycle.”

During the recession many consumers now rely solely on their debit cards to make purchases because the money is withdrawn directly from their checking account, so in essence you cannot spend what you do not have. Furthermore, the recession has led some cardholders to reduce their credit card use and focus on paying off outstanding balances, MasterCard purchase transactions in the third quarter went up 15.3% on a local currency basis to $469 billion worldwide, whereas a year ago the growth rate was only 7.9%.

Banks have also cut back on lending during the recession, which has negatively impacted commercial card programs; however, a recent upsurge in use of these programs by businesses has also contributed to positive numbers in credit volume. At $5.63 a share, the company exceeded analysts` approximations of $4.82. And profits were up by 38% compared to the same quarter last year at a booming $716 million.

MasterCard trails behind Visa with much less shares of the debit-card market. However, the company is making some noteworthy headway by taking over banks` debit card portfolios from Visa. The company recently announced that it acquired the debit portfolio of Huntington Bancshares Inc. (HBAN), which had previously been a Visa issuer. In previous years it had similar success with Banco Santander SA`s (STD) Sovereign Bank and SunTrust Banks Inc. (STI).

However, there was a noticeable gap in MasterCard`s credit and debit card growth. The debit card sector increased by a whopping 23%, while credit cards only rose by 7%.

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