# How credit card companies work **URL:** \ **Category:** Miscellaneous and Personal Stuff I Must Share\ **Created:** [February 13, 2006, 3:11pm UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274 "2006-02-13T15:11:20Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Dob](https://avatars.discourse-cdn.com/v4/letter/d/b2d939/32.png) [@Dob](https://boards.straightdope.com/u/Dob)\ **Post date:** [February 14, 2006, 1:51pm UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/21 "2006-02-14T13:51:05Z")
> [@](#): > > I thought Visa/MC also took 4% of the transaction? Visa/MC doesnt. The Merchant bank that processes the Visa/MC transaction for them, takes a percentage of the sale, but I dont think its 4%. That seems high, but it is not Visa/MC that sets that. > [@](#): > > Dob, can I have some sort of cite that Visa allows merchants to require ID for transactions as a matter of policy, and not just for suspicious and card-not-signed transactions? I dont know of any external documents, let me look around some and see what I can find. **slaphead** The docs I have seen concerning the Amex/Bank setups are not at all what Visa/MC has with those same banks. I would not go so far as to say those banks Issue Amex. It is still more like a co-brand partnership. But, I am not in the member relationship area…so I could be wrong. Your correct to a point on the anti-trust issue. Amex had always found that unfair. But it wasnt until Wal-Mart sued due to unfair association rules that Amex really put the screws to us. They saw someone going after us, and kinda jumped on the bandwagon. Would Amex eventually gone after us? Probably. But Wal-Mart greased the way. ---
**Author:** ![kambuckta](https://avatars.discourse-cdn.com/v4/letter/k/53a042/32.png) [@kambuckta](https://boards.straightdope.com/u/kambuckta)\ **Post date:** [February 14, 2006, 1:52pm UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/22 "2006-02-14T13:52:57Z")
How come that companies/organisations that have permission to access your credit card for debit stuff also have access to information about your **other** transactions that take place? It seems that Visa (and MasterCard and Amex and Diners etc) all sell off that same information. Wonderfully lucrative market out there, knowing what people are spending their money on. :eek: ---
**Author:** ![35340](https://avatars.discourse-cdn.com/v4/letter/3/8baadc/32.png) [@35340](https://boards.straightdope.com/u/35340)\ **Post date:** [February 14, 2006, 2:16pm UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/23 "2006-02-14T14:16:02Z")
[hijack] **May I see your ID, please?** Put it in a windowed pocket of your wallet, with a post-it note over the address (not the name, picture, or signature), and flash them, without ever surrendering the wallet. Other times I’ve simply had them reverse the transaction, and made my purchase with a Visa Check Card, providing a PIN number on the provided pad in lieu of identification. [/hijack] So what security is there in providing your billing zip code for ‘confirmation’? For a while I thought it was for marketing purposes (especially when it is asked for before you even present a method of payment) but when I moved, I noticed that at a few specific stores (Wal-Mart - no longer shop there, Walgreens, various pay-at-the-pump gas stations) you had to provide the correct zipcode or the transaction would fail (when I moved I changed zipcodes and would forget which one to use). ---
**Author:** ![35340](https://avatars.discourse-cdn.com/v4/letter/3/8baadc/32.png) [@35340](https://boards.straightdope.com/u/35340)\ **Post date:** [February 14, 2006, 2:18pm UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/24 "2006-02-14T14:18:02Z")
> [@kambuckta](#): > > How come that companies/organisations that have permission to access your credit card for debit stuff also have access to information about your **other** transactions that take place? > > It seems that Visa (and MasterCard and Amex and Diners etc) all sell off that same information. > > Wonderfully lucrative market out there, knowing what people are spending their money on. > > :eek: Pay cash. Buy giftcards with cash and pay for transactions with those. ---
**Author:** ![ParentalAdvisory](https://avatars.discourse-cdn.com/v4/letter/p/53a042/32.png) [@ParentalAdvisory](https://boards.straightdope.com/u/ParentalAdvisory)\ **Post date:** [February 14, 2006, 2:27pm UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/25 "2006-02-14T14:27:18Z")
So who gets to keep the 20% interest? ---
**Author:** ![kambuckta](https://avatars.discourse-cdn.com/v4/letter/k/53a042/32.png) [@kambuckta](https://boards.straightdope.com/u/kambuckta)\ **Post date:** [February 14, 2006, 2:29pm UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/26 "2006-02-14T14:29:55Z")
> [@Mynn](#): > > Pay cash. Buy giftcards with cash and pay for transactions with those. I don’t have a credit card. It is not **my** privacy that I am concerned with. ---
**Author:** ![Dob](https://avatars.discourse-cdn.com/v4/letter/d/b2d939/32.png) [@Dob](https://boards.straightdope.com/u/Dob)\ **Post date:** [February 14, 2006, 2:36pm UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/27 "2006-02-14T14:36:22Z")
> [@](#): > > So who gets to keep the 20% interest? The Bank who issued you your card, i.e. Citibank, Chase, Bank of America, etc… > [@](#): > > It seems that Visa (and MasterCard and Amex and Diners etc) all sell off that same information Sorry Kam, I dont get what your asking! ---
**Author:** ![kambuckta](https://avatars.discourse-cdn.com/v4/letter/k/53a042/32.png) [@kambuckta](https://boards.straightdope.com/u/kambuckta)\ **Post date:** [February 14, 2006, 2:57pm UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/28 "2006-02-14T14:57:47Z")
> [@Dob](#): > > Sorry Kam, I dont get what your asking! I’m not asking anything. I am just providing some info that might be of interest to other posters here…namely that if you do transactions on your credit card with X company, then that information (and the amount you spend each month) is available to _other_ companies who you transact with via your credit card. So you spend $20 at Walmart and $30 at Sears and $150 at ToysRUs…and then you go to the Supermarket to buy some milk and bread on your c/c…all of the above establishments will have a record of what you have bought and where and when and exactly for what. ---
**Author:** ![slaphead](https://avatars.discourse-cdn.com/v4/letter/s/e9bcb4/32.png) [@slaphead](https://boards.straightdope.com/u/slaphead)\ **Post date:** [February 14, 2006, 4:11pm UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/29 "2006-02-14T16:11:51Z")
> [@Dob](#): > > The docs I have seen concerning the Amex/Bank setups are not at all what Visa/MC has with those same banks. I would not go so far as to say those banks Issue Amex. It is still more like a co-brand partnership. But, I am not in the member relationship area…so I could be wrong. Hard to tell without acess to all the documentation I guess. From [here](http://home3.americanexpress.com/corp/pc/2004/mbna_axp.asp) it says > [@press propaganda release](#): > > MBNA will issue its own American Express-branded credit cards in the United States. In addition, the companies confirmed plans for MBNA to issue American Express-branded credit cards in Canada, Spain and the United Kingdom. The cards will carry the American Express logo and will be accepted on the American Express global merchant network. MBNA will own the loans and will manage and service accounts on its own systems. That sounds pretty much like a normal credit card setup, although it’s complicated because of all the affinity/co-brand deals MBNA has inked. There are so many fingers in the pie it’s hard to figure out what’s going on. **kambuckta** - it’s possible that this may happen in the US but it would be highly illegal in Europe. I would have thought it would also be illegal even in the US. Maybe if all the personally identifiable info is scrubbed out and the data is aggregated… ---
**Author:** ![Lissa](https://avatars.discourse-cdn.com/v4/letter/l/85f322/32.png) [@Lissa](https://boards.straightdope.com/u/Lissa)\ **Post date:** [February 14, 2006, 4:41pm UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/30 "2006-02-14T16:41:03Z")
> [@AmbushBug](#): > > No good; “Not valid unless signed.” the post office and any other merchant who knows what they’re doing won’t accept the credit cards if they’re not signed. They are signed-- the “SEE I.D” is written in marker below the signiature. ---
**Author:** ![Maeglin](https://avatars.discourse-cdn.com/v4/letter/m/8baadc/32.png) [@Maeglin](https://boards.straightdope.com/u/Maeglin)\ **Post date:** [February 14, 2006, 11:10pm UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/31 "2006-02-14T23:10:33Z")
Incidentally, I do work for American Express on the acquirer side. This is the part of the business that owns the relationship with merchants who accept the card. MBNA, Citi, and others are issuing Amex cards. These are not simply cobrand deals. The banks are issuing the cards and they own the cardmember relationships. There are millions of such cards already in force. ---
**Author:** ![Maeglin](https://avatars.discourse-cdn.com/v4/letter/m/8baadc/32.png) [@Maeglin](https://boards.straightdope.com/u/Maeglin)\ **Post date:** [February 14, 2006, 11:12pm UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/32 "2006-02-14T23:12:36Z")
Forgot to add: > [@](#): > > Quote: > Dob, can I have some sort of cite that Visa allows merchants to require ID for transactions as a matter of policy, and not just for suspicious and card-not-signed transactions? Typically this would _not_ be allowed. Asking for ID on all transactions is a passive form of suppression and is often forbidden in card acceptance contracts. ---
**Author:** ![doreen](https://avatars.discourse-cdn.com/v4/letter/d/858c86/32.png) [@doreen](https://boards.straightdope.com/u/doreen)\ **Post date:** [February 15, 2006, 12:28am UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/33 "2006-02-15T00:28:59Z")
> [@Mynn](#): > > So what security is there in providing your billing zip code for ‘confirmation’? For a while I thought it was for marketing purposes (especially when it is asked for before you even present a method of payment) but when I moved, I noticed that at a few specific stores (Wal-Mart - no longer shop there, Walgreens, various pay-at-the-pump gas stations) you had to provide the correct zipcode or the transaction would fail (when I moved I changed zipcodes and would forget which one to use). Some stores ask for your zip code no matter how you pay and use that info to determine the location for a new store. With pay at the pump , I 've only had to enter the zip code when there was no option to enter a PIN, and in that case, the zip code provides some small amount of security. ---
**Author:** ![Ghanima](https://avatars.discourse-cdn.com/v4/letter/g/9e8a1a/32.png) [@Ghanima](https://boards.straightdope.com/u/Ghanima)\ **Post date:** [February 15, 2006, 12:38am UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/34 "2006-02-15T00:38:39Z")
So perhaps I’m missing something here. You sat Visa doesn’t collect any of the interest. It appears that you are saying that the only source of income for Visa is the transaction fee. At .001 cent per transaction and calculating using the conservative number of 4000 transactions per second according to the OP, I get that Visa makes approximately $3456 per day. Which equals $1,261,440 per year. I don’t think so. There’s got to be more money coming in somehow. Or did I miss something? ---
**Author:** ![ParentalAdvisory](https://avatars.discourse-cdn.com/v4/letter/p/53a042/32.png) [@ParentalAdvisory](https://boards.straightdope.com/u/ParentalAdvisory)\ **Post date:** [February 15, 2006, 1:09am UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/35 "2006-02-15T01:09:22Z")
> [@Ghanima](#): > > Or did I miss something? Maybe. 4000 \* .001 = 4 4 \* 60 sec = 240 240 \* 14,400 (60 min) = $345,600 345,600 \* 24hrs = $8,294,400 $8,294,400 \* 365 days p/year = $3,027,456,000 I could be wrong too. I would think they would get more to be honest. ---
**Author:** ![ParentalAdvisory](https://avatars.discourse-cdn.com/v4/letter/p/53a042/32.png) [@ParentalAdvisory](https://boards.straightdope.com/u/ParentalAdvisory)\ **Post date:** [February 15, 2006, 1:16am UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/36 "2006-02-15T01:16:53Z")
Whoops, botched that one. Let’s see if this one works… 4000 \* $.001 = $4 $4 \* 60 sec = $240 $240 \* 60 min = $14,400 $14,400 \* 24 hrs = $345,600 $345,600 \* 365 days p/year = **$126,144,000** ---
**Author:** ![35340](https://avatars.discourse-cdn.com/v4/letter/3/8baadc/32.png) [@35340](https://boards.straightdope.com/u/35340)\ **Post date:** [February 15, 2006, 1:47am UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/37 "2006-02-15T01:47:40Z")
> [@doreen](#): > > Some stores ask for your zip code no matter how you pay and use that info to determine the location for a new store. With pay at the pump , I 've only had to enter the zip code when there was no option to enter a PIN, and in that case, the zip code provides some small amount of security. Right, which is why I decline when I know it’s for plotting purposes - but I’ve had my cards rejected at Walgreens and Wal-mart when I’ve given the wrong zipcode. ---
**Author:** ![Basandre](https://avatars.discourse-cdn.com/v4/letter/b/bcef8e/32.png) [@Basandre](https://boards.straightdope.com/u/Basandre)\ **Post date:** [February 15, 2006, 3:36am UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/38 "2006-02-15T03:36:36Z")
I can’t say anything about Wal-mart or Walgreens, but when you pay at the pump, there’s no human being to become suspicious and ask for ID, or see a “SEE I.D” written on the back of the card, or reject a card for not being signed. A thief who has just stolen a bunch of cards and wants to try them to see which ones have been cancelled couldn’t ask for a better opportunity. The theory is, a thief isn’t going to know the zip code that the bill is sent to, but you will. (In practice, there are a bunch of things wrong with it.) ---
**Author:** ![Dob](https://avatars.discourse-cdn.com/v4/letter/d/b2d939/32.png) [@Dob](https://boards.straightdope.com/u/Dob)\ **Post date:** [February 15, 2006, 2:28pm UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/39 "2006-02-15T14:28:11Z")
Visa gets money through a large range of fees and monthly charges to its members. I just used the transaction cost as an example. [friendly teasing] > [@](#): > > Incidentally, I do work for American Express on the acquirer side. So…i’m guessing your posting from work? Because if your working for Amex you cant be that busy! 🙂 [/friendly teasing] Maybe I am incorrect on the Amex bank deals. I thought Bank of Hawaii was truly the only one…since Amex bought them or something like that. I will do my research. ---
**Author:** ![Maeglin](https://avatars.discourse-cdn.com/v4/letter/m/8baadc/32.png) [@Maeglin](https://boards.straightdope.com/u/Maeglin)\ **Post date:** [February 15, 2006, 2:54pm UTC](https://boards.straightdope.com/t/how-credit-card-companies-work/344274/40 "2006-02-15T14:54:47Z")
> [@Dob](#): > > Visa gets money through a large range of fees and monthly charges to its members. I just used the transaction cost as an example. > > [friendly teasing] > > So…i’m guessing your posting from work? Because if your working for Amex you cant be that busy! 🙂 It was my dinner break. I was here until 8 PM. 🙂 > [@](#): > > Maybe I am incorrect on the Amex bank deals. I thought Bank of Hawaii was truly the only one…since Amex bought them or something like that. I will do my research. Banks have been issuing cards for Amex for years in non-US markets. Amex was only closed out of making bank deals in the US. For example, [here’s](http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/01-18-2006/0004262783&EDATE=) the GE deal that was announced last month. Here’s the key paragraph: > [@](#): > > The new cards will carry the American Express logo and be accepted on the > American Express global merchant network. Under the terms of the agreement, GE > Consumer Finance will be responsible for issuing the cards, managing the > customer relationships and providing customer service, billing and credit > management. [Previous page](https://boards.straightdope.com/t/how-credit-card-companies-work/344274.md?page=1) [Next page](https://boards.straightdope.com/t/how-credit-card-companies-work/344274.md?page=3)