topic Re: Rewards programs make lots of money for MC/Visa in Credit Cards

Rewards programs make lots of money for MC/Visa

pipeguy — Thu, 30 Oct 2014 14:17:41 GMT

Just posted on the financial newtorks - Visa and MasterCard saw strong usage of their cards resulting in strong profits. If you think the "rewards" have consumers in mind, think again because they are designed to increase usage and swipe fees.

VISA

The world's largest credit and debit card company reported quarterly earnings of $2.18 per share, ex-items, topping expectations for $2.10 per share.

Analysts had expected the company to report earnings of $2.10 a share on $3.91 billion in revenue, according to a consensus estimate from Thomson Reuters.

MasterCard

The company's net income rose to $1.02 billion, or 87 cents per share, in the third quarter ended Sept. 30 from $879 million, or 73 cents per share, a year earlier.

Net revenue rose 12.8 percent to $2.5 billion.

Re: Rewards programs make lots of money for MC/Visa

yfan — Thu, 30 Oct 2014 15:01:33 GMT

There's no doubt that rewards programs are designed to increase usage. However, Visa and Mastercard do not issue credit cards or run rewards programs, financial institutions do. Visa and MC are just the payment networks. So while they benefit from cards being used, the lion's share of the benefits/losses from specific rewards programs are taken by issuing banks.

Re: Rewards programs make lots of money for MC/Visa

Anonymous — Thu, 30 Oct 2014 15:10:40 GMT

+1 Great answer.

Re: Rewards programs make lots of money for MC/Visa

jsucool76 — Thu, 30 Oct 2014 15:12:57 GMT

But what OP means is that because of reward programs credit cards are being used more often, benefiting both the banks, and the networks.

Re: Rewards programs make lots of money for MC/Visa

pipeguy — Thu, 30 Oct 2014 16:24:44 GMT

@jsucool76 wrote:
But what OP means is that because of reward programs credit cards are being used more often, benefiting both the banks, and the networks.

Yup - if you think of the concept, "they" want you to use your card for 100% of your spending. Both card issuers and the networks (MC/V/AE/D) get paid everytime you use your card. As consumers, how much "extra" are we paying so that someone gets a piece of every dollar we spend? I understand the benefits and the marketing and even the rewards, I'm just taking a look at the why we buy the marketing. Retailers pay a ton of money to use credit cards, it has to be reflected in prcing....

Edit add: It's a proven fact that when you (consumers in general) have to spend cash you spend less.

Re: Rewards programs make lots of money for MC/Visa

Imperfectfuture — Thu, 30 Oct 2014 16:52:36 GMT

It's also a proven fact that when taxes are rolled back (at least in my area where the soda tax was repealed), swipe fees are lowered (which the merchants bargained heavily for), and even if I carry cash to shop, buy bus tickets etc.:

IT'S STILL THE SAME PRICE. Merchants take the savings from the above scenarios, and pad their bottom line (since retailers aren't doing that hot on the market these days, including Starbucks, not bad, just not much growth, unless you are unloved like JCP).

Now, if you buy a car for cash, yes, save money. But only small mom and pop shops offer discount for cash (or surcharge for debit/credit use).

Re: Rewards programs make lots of money for MC/Visa

Anonymous — Thu, 30 Oct 2014 16:58:23 GMT

@Imperfectfuture wrote:
It's also a proven fact that when taxes are rolled back (at least in my area where the soda tax was repealed), swipe fees are lowered (which the merchants bargained heavily for), and even if I carry cash to shop, buy bus tickets etc.:

IT'S STILL THE SAME PRICE. Merchants take the savings from the above scenarios, and pad their bottom line (since retailers aren't doing that hot on the market these days, including Starbucks, not bad, just not much growth, unless you are unloved like JCP).

Now, if you buy a car for cash, yes, save money. But only small mom and pop shops offer discount for cash (or surcharge for debit/credit use).

Right, the reference is not to cost per unit thing, it's total amount spent. There is somewhat of a research consensus that credit cards increase overall spending, although many here deny this (probably wrongly!). Lots of different way this happens:

1) first, not handing over real cash, which is a brake to some

2) things are cheaper: "It's $100 but with Freedom I get $5 back, so it's only $95" And maybe you wouldn't have bought it for $100 (or even $95 with cash) but now it is a bargain. In fact, buy 2!

3) Meeting minimum spend. Sure, some may merely accelarate spending they would otherwise do, but I would guess that many do extra spending to meet the goal. Maybe not for $500, but for $3K, or the $10K AA Exec cards.

Re: Rewards programs make lots of money for MC/Visa

pipeguy — Thu, 30 Oct 2014 17:53:58 GMT

Looking at "just" the figures reported for a single quarter for MC/Visa their income is $4.93 BILLION and this does not include AmEx or Discover figures nor is it the heavy spending holifday season. That's a ton of money for the networks, which of course does not include the Chaser/CiTi/Wells, et al share.

Like I said, I understand the marketing and rebate (rewards) but the "share" credit cards off the top of every sale has to come from somewhere. I know this forum (et al) tend to be more in the loop as far as max'ing the advantage of cards - who knew that manufactured spending was a way to churn rewards? I didn't....

I just find it interesting that "they" have convienced "us" that we should process 100% of our spending through their system so they can get a cut of money we would spend anyway. Very succesful it seems, it just somehow seems wrong....

Re: Rewards programs make lots of money for MC/Visa

MissMoni223 — Thu, 30 Oct 2014 18:03:41 GMT

Thanks for sharing.

Re: Rewards programs make lots of money for MC/Visa

Anonymous — Thu, 30 Oct 2014 21:13:50 GMT

Personally, I'm thrilled with the 10.24% I earned just today on the value of my Visa stock. And also the $4,873.19 in rewards I've earned so far this year by using rewards cards for purchases I'd have made anyway.

Chris.

Re: Rewards programs make lots of money for MC/Visa

Anonymous — Thu, 30 Oct 2014 21:18:55 GMT

@Anonymous wrote:
Personally, I'm thrilled with the 10.24% I earned just today on the value of my Visa stock. And also the $4,873.19 in rewards I've earned so far this year by using rewards cards for purchases I'd have made anyway.

Chris.

Every single one of them? Really?

Re: Rewards programs make lots of money for MC/Visa

14Fiesta — Thu, 30 Oct 2014 22:01:33 GMT

@pipeguy wrote:
@jsucool76 wrote:
But what OP means is that because of reward programs credit cards are being used more often, benefiting both the banks, and the networks.
Yup - if you think of the concept, "they" want you to use your card for 100% of your spending. Both card issuers and the networks (MC/V/AE/D) get paid everytime you use your card. As consumers, how much "extra" are we paying so that someone gets a piece of every dollar we spend? I understand the benefits and the marketing and even the rewards, I'm just taking a look at the why we buy the marketing. Retailers pay a ton of money to use credit cards, it has to be reflected in prcing....

Edit add: It's a proven fact that when you (consumers in general) have to spend cash you spend less.

And it is. Most retailers hide it into the cost of the product that you pay for. So if I pay cash, I am paying for other peoples rewards and getting none myself. Might as well use a rewards CC and get in on the money.

Re: Rewards programs make lots of money for MC/Visa

Turbobuick — Thu, 30 Oct 2014 22:04:55 GMT

It's no secret Visa is making money. Their stock has more than tripled in 3+ yrs. Other than taxes, swipe fees are the mechants largest liability.

Re: Rewards programs make lots of money for MC/Visa

Anonymous — Thu, 30 Oct 2014 22:04:02 GMT

@14Fiesta wrote:
@pipeguy wrote:
@jsucool76 wrote:
But what OP means is that because of reward programs credit cards are being used more often, benefiting both the banks, and the networks.
Yup - if you think of the concept, "they" want you to use your card for 100% of your spending. Both card issuers and the networks (MC/V/AE/D) get paid everytime you use your card. As consumers, how much "extra" are we paying so that someone gets a piece of every dollar we spend? I understand the benefits and the marketing and even the rewards, I'm just taking a look at the why we buy the marketing. Retailers pay a ton of money to use credit cards, it has to be reflected in prcing....

Edit add: It's a proven fact that when you (consumers in general) have to spend cash you spend less.
And it is. Most retailers hide it into the cost of the product that you pay for. So if I pay cash, I am paying for other peoples rewards and getting none myself. Might as well use a rewards CC and get in on the money.

Unless that causes you to spend more than you would otherwise, which is the point.

Re: Rewards programs make lots of money for MC/Visa

Anonymous — Thu, 30 Oct 2014 22:04:28 GMT

@Anonymous wrote:
@Anonymous wrote:
Personally, I'm thrilled with the 10.24% I earned just today on the value of my Visa stock. And also the $4,873.19 in rewards I've earned so far this year by using rewards cards for purchases I'd have made anyway.

Chris.
Every single one of them? Really?

Well, okay, yeah, the payments I made to myself using Amazon Payments, and then immediately turned into cash and deposited into my checking account, *those* I wouldn't have made otherwise.

But other than that, yep, every one.

Chris.

Re: Rewards programs make lots of money for MC/Visa

Anonymous — Thu, 30 Oct 2014 22:06:56 GMT

@14Fiesta wrote:
@pipeguy wrote:
@jsucool76 wrote:
But what OP means is that because of reward programs credit cards are being used more often, benefiting both the banks, and the networks.
Yup - if you think of the concept, "they" want you to use your card for 100% of your spending. Both card issuers and the networks (MC/V/AE/D) get paid everytime you use your card. As consumers, how much "extra" are we paying so that someone gets a piece of every dollar we spend? I understand the benefits and the marketing and even the rewards, I'm just taking a look at the why we buy the marketing. Retailers pay a ton of money to use credit cards, it has to be reflected in prcing....

Edit add: It's a proven fact that when you (consumers in general) have to spend cash you spend less.
And it is. Most retailers hide it into the cost of the product that you pay for. So if I pay cash, I am paying for other peoples rewards and getting none myself. Might as well use a rewards CC and get in on the money.

Exactly. For every purchase I make, if the merchant had offered a discount for paying with cash of at least the amount I would have earned in rewards plus 1¢, I'd have made the same purchase with cash instead of credit. But as long as there's a net gain to me for using credit, I will.

Chris.

Re: Rewards programs make lots of money for MC/Visa

14Fiesta — Thu, 30 Oct 2014 22:12:33 GMT

@Anonymous wrote:
@14Fiesta wrote:
@pipeguy wrote:
@jsucool76 wrote:
But what OP means is that because of reward programs credit cards are being used more often, benefiting both the banks, and the networks.
Yup - if you think of the concept, "they" want you to use your card for 100% of your spending. Both card issuers and the networks (MC/V/AE/D) get paid everytime you use your card. As consumers, how much "extra" are we paying so that someone gets a piece of every dollar we spend? I understand the benefits and the marketing and even the rewards, I'm just taking a look at the why we buy the marketing. Retailers pay a ton of money to use credit cards, it has to be reflected in prcing....

Edit add: It's a proven fact that when you (consumers in general) have to spend cash you spend less.
And it is. Most retailers hide it into the cost of the product that you pay for. So if I pay cash, I am paying for other peoples rewards and getting none myself. Might as well use a rewards CC and get in on the money.
Unless that causes you to spend more than you would otherwise, which is the point.

But it doesn't, at least not for me. If I decide I want to stop at Taco Bell on a whim and order the new strawberry Starburst freeze, I will do it whether I pull out Discover and pay for it or pull out some wadded bills and change and hand it over.

Re: Rewards programs make lots of money for MC/Visa

sandman2435 — Thu, 30 Oct 2014 22:17:07 GMT

@Anonymous wrote:
@14Fiesta wrote:
@pipeguy wrote:
@jsucool76 wrote:
But what OP means is that because of reward programs credit cards are being used more often, benefiting both the banks, and the networks.
Yup - if you think of the concept, "they" want you to use your card for 100% of your spending. Both card issuers and the networks (MC/V/AE/D) get paid everytime you use your card. As consumers, how much "extra" are we paying so that someone gets a piece of every dollar we spend? I understand the benefits and the marketing and even the rewards, I'm just taking a look at the why we buy the marketing. Retailers pay a ton of money to use credit cards, it has to be reflected in prcing....

Edit add: It's a proven fact that when you (consumers in general) have to spend cash you spend less.
And it is. Most retailers hide it into the cost of the product that you pay for. So if I pay cash, I am paying for other peoples rewards and getting none myself. Might as well use a rewards CC and get in on the money.
Exactly. For every purchase I make, if the merchant had offered a discount for paying with cash of at least the amount I would have earned in rewards plus 1¢, I'd have made the same purchase with cash instead of credit. But as long as there's a net gain to me for using credit, I will.

Chris.

This past year I've earned close to 5K in free airfare,hotel stays,cash back,Now this also includes sign up bonuses...not a penny paid in intrest.and about $395.00 in membership fees

Re: Rewards programs make lots of money for MC/Visa

Anonymous — Thu, 30 Oct 2014 23:12:23 GMT

@14Fiesta wrote:
@Anonymous wrote:
@14Fiesta wrote:
@pipeguy wrote:
@jsucool76 wrote:
But what OP means is that because of reward programs credit cards are being used more often, benefiting both the banks, and the networks.
Yup - if you think of the concept, "they" want you to use your card for 100% of your spending. Both card issuers and the networks (MC/V/AE/D) get paid everytime you use your card. As consumers, how much "extra" are we paying so that someone gets a piece of every dollar we spend? I understand the benefits and the marketing and even the rewards, I'm just taking a look at the why we buy the marketing. Retailers pay a ton of money to use credit cards, it has to be reflected in prcing....

Edit add: It's a proven fact that when you (consumers in general) have to spend cash you spend less.
And it is. Most retailers hide it into the cost of the product that you pay for. So if I pay cash, I am paying for other peoples rewards and getting none myself. Might as well use a rewards CC and get in on the money.
Unless that causes you to spend more than you would otherwise, which is the point.
But it doesn't, at least not for me. If I decide I want to stop at Taco Bell on a whim and order the new strawberry Starburst freeze, I will do it whether I pull out Discover and pay for it or pull out some wadded bills and change and hand it over.

OK, obviously not easy way to tell, but: various studies show that it does in fact increase spending. So maybe you are more likely to stop on a whim if it is a piece of plastic (with rewards) than handing over folding cash. Or maybe not. But enough people say "No, not me" in disagreement with the population that suggests that not everyone is aware of the impact it actually has,

But ok, maybe MyFico members are exempt, and never even subconsiously think "I am getting rewards for this" or "This helps meet minimum spend" when consideriing discretionary spend!

Re: Rewards programs make lots of money for MC/Visa

Anonymous — Thu, 30 Oct 2014 23:30:10 GMT

I'm sure amex made much more than visa and mastercard because of blue cash card