Visa, MasterCard profits boom on consumer card use

Both Visa and MasterCard posted significant profit increases in the final three months of last year as consumers used the companies' branded debit cards and took on more credit card.

MasterCard saw its profits surge 41 percent in the fourth quarter of 2010 as the number of transactions it handled rose 6.3 percent over the previous three months, to 6.2 billion, according to a report from The Associated Press. Net profits for the payment processing network rose to $415 million, up from $294 million in the fourth quarter of 2009.

The value of all purchases made the company's its branded cards rose 11 percent from 2009, to $567 billion, the report said. The rate at which consumers took on credit card debt rose 3 percent, and debit card use rose nearly 4 percent.

For Visa, MasterCard's bigger rival, quarterly profits climbed 16 percent, alsothanks to increased consumer spending in terms of both value and transaction volume, according to the company's latest regulatory filing. Overall, transactions in which consumers took on credit card debt or used their debit cards were valued at $897 billion in the quarter, up 15 percent over the same period in 2009. That was also a significant increase from the previous quarter, in which the company saw a transaction volume of $829 billion.

The company also saw service revenues increase 22 percent over the previous year to $1 billion, the report said.

"Visa is in a strong position to continue to accelerate the migration to electronic payments, particularly in economies where cash and check remain predominant," said Joseph Saunders, the company's chairman and chief executive officer. He added that Visa is attempting to expand payment services to mobile phones and ecommerce.

Many credit card companies are preparing for their profits to be dampened by greater federal regulation of the payment processing industry, which has targeted debit card swipe fees for significant caps. A proposed rule from the Federal Reserve Board would limit debit card interchange fees to just 13 cents per transaction, rather than the current 1 or 2 percent of the purchase's value.