What is the general relationship between banks and credit card companies?

[DaveV]

The proprietor (merchant) who accepts the Visa/MC as a form of payment is the one who pays the fee when you purchase something from them. Last I remember from years ago, it was something like 6% of the purchase price.

That is why Square was such a cool new idea. Their merchant fee was something like 1.5%.

The merchant fee varies depending on merchant type and whether or not the card was present.
6% is a bit on the high end, but not unheard of for risky merchants. Also, American Express usually charges a higher fee, but justifies it be having a higher income cardholder base.

 

[ajacobson]

Typical

The amount of business done is part of the variable.

Payment network Average credit card processing fees
Visa 1.29% + $0.05 to 2.54% + $0.10
Mastercard 1.29% + $0.05 to 2.64% + $0.10
Discover 1.48% + $0.05 to 2.53% + $0.10
American Express 1.58% + $0.10 to 3.45% + $0.10

 

[longandshort]

It's BAML not BOFA

As an ex-BAML trader I hate to say it but it’s just bofa now.

 

[SunTrader]

Easy. The banks make money on the interest you owe them as you carry a balance. Visa and M/C simply collect their fees for each transaction.

Yes, you can get a "Visa card" without going through a bank. It's a pre-paid card, so not really a credit card. But you pay a fee for the privilege.

Not all pre-paid charge a fee. For instance Wal-Mart. I've got a couple, originally loaded with $300 apiece which I've re-loaded many times over - no fees at all. Comes in handy for transactions I don't want to hit my bank .

 

[SunTrader]

As for processing fees, it all depends on who is doing the processing. Any of the major banks or credit card processing companies. The latter are for the most part lower. At least that was my experience previously.

 

[BMK]

All MasterCard and VISA cards are issued by a financial institution--whether they are credit cards or debit cards. The financial institution may be a bank or it may be something else, such as a credit union, or a "nonbank" financial institution. Bank is a technical term in federal and state law. All banks are financial institutions, but not all financial institutions are banks. Brokers like Schwab and Fidelity are financial institutions, and they can issue cards.

Cards may be "branded" with something like Wal-Mart or Amazon, but if you read the terms and conditions, or just look at the back of the card, you can see that it is issued by a financial institution.

In order to issue cards, the financial institution must be a member of the MasterCard or VISA network. It's a licensing agreement.

BMK

 

[murray t turtle]

Not all pre-paid charge a fee. For instance Wal-Mart. I've got a couple, originally loaded with $300 apiece which I've re-loaded many times over - no fees at all. Comes in handy for transactions I don't want to hit my bank .

%%
WMT @ some locations also gives a WMT card discount on their MUR gas.
Plenty of merchants have a sign noting the extra credit card fee.
Local MCD takes most of any kind of card/they sell a lot more that way.

 

[RGLD]

Yes, you can get a "Visa card" without going through a bank. It's a pre-paid card, so not really a credit card. But you pay a fee for the privilege.

Jim, do I get any benefits from getting a card directly from the card company? They must give something to incentivize cutting out the bank.

 

[BMK]

do I get any benefits from getting a card directly from the card company? They must give something to incentivize cutting out the bank.

You cannot get a credit card or debit card "directly from the card company." MasterCard and VISA do not establish card accounts for individuals.

A prepaid card is simply a type of debit card. It has different rules. It is usually not tied to a traditional checking account. You cannot write paper checks, and you cannot make payments using the ACH system. Most prepaid card issuers do not have brick-and-mortar offices. You can only make deposits through their agents, such as gas stations and grocery stores, and there is often a fee for making deposits. But at the end of the day, a prepaid card is just another debit card. And you can only get one from a financial institution.

It does not matter whether you are talking about a traditional debit card tied to a checking account, a traditional credit card, or a prepaid debit card. They are all issued by banks and other financial institutions that are members of MasterCard or VISA. You cannot get any type of MasterCard or VISA directly from MasterCard or VISA.

If anyone believes otherwise, please post a link to a website where I can apply for one, or where I can read the cardholder agreement. I guarantee that the fine print will identify a bank, credit union, or other financial institution as the card issuer.

The closest you can get to getting a card directly from the "card company" would be American Express or Discover. But again, if you read the fine print, you'll see that the card issuer is a financial institution.

Most AmEx cards are issued directly by American Express, and some of them have very good benefits.

But even AmEx has licensed their card brand to a few select financial institutions. For a while, Wells Fargo was issuing AmEx cards with special features, but I read that they have stopped taking new applications.

And every time I log into my IRA account at Schwab, I get a popup offering me the opportunity to apply for a "Charles Schwab American Express Platinum Card."

BMK

 

[grabien]

Didn't know all of that