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Credit Card Applications » News » Other » MasterCard sees its profits go over the roof

MasterCard sees its profits go over the roof

October 21, 2010
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It looks like the new legislation has not done anything to dent the profits of the credit card industry giant. A recent statement from MasterCard seemed to show that the company's profits are soaring, even while every other lender has been adversely affected by the Credit card Accountability Responsibility and Disclosure Act 2009. As per the reports of the Associated Press, MasterCard is expecting the company's income from both debit and credit card dealings in the country to increase by a stupendous 20% during the current year. This is a year when credit card holders lost a lot more than just credit making the profit even more magnificent in such a year. There are many analysts who have been surprised at the great profits earned by MasterCard at a time when most companies are desperately trying to keep losses out of their balance sheets.

One of the most obvious reasons is the fact that unlike most other credit card companies that have lent money to customers who have defaulted on the credit card debt, MasterCard doesn't extend credit. This saves the company from the risks of lending unlike most of the other credit card companies. MasterCard earns its revenue from a different way through transactions of its branded credit and debit cards taking place. Interestingly, the interchange fees earlier called the transaction, fees has not been regulated by the new reforms under the CARD Act.

Although the CARD Act doesn't touch upon the interchange fees, it certainly regulates the debit card transaction fees. The Act doesn't however address the transaction fee for the credit cards. The transaction fees or the interchange fee on the debit card is regulated as per the Dodd-Frank Wall Street reform and Consumer Protection Act. However, MasterCard has continued to rake in profits because the revenues that the credit card giant earns from the transaction fee on the debit card dealings, only accounts for 15% of the business of the company. A large part of the company's revenues is generated by the transaction fee earned through the dealings of the credit card customers which are out of purview of the new legislations. This is the reason why the company doesn't expect the new laws to eat away into its revenues. If anything there is a chance that the card behemoth would be in a better position for bargaining in the future acquisitions by the company.

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