What Is a MasterCard?

A MasterCard card is any electronic payment card that uses the MasterCard network for processing transaction communications. These cards are typically branded with a MasterCard logo. They can be credit, debit, or prepaid cards.

MasterCard Explained

MasterCard cards are typically issued as a branded card with the MasterCard logo. This helps to identify their eligibility for use. Electronic payment cards have cardholder numbers that begin with an issuer identification number (IIN) distinguishing MasterCard as the processor for electronic payments. The IIN can help to identify the card brand if a logo is not visible.

MasterCard the Company

MasterCard itself is a financial services business that partners with financial institutions to issue MasterCard branded cards that are processed through the MasterCard network. The issuing financial institution usually pays the cost of producing the cards and mailing them to customers with specific card terms. When a financial institution partners with MasterCard then it means that all transaction processing communications must be done through MasterCard as the network processor.

MasterCard does not have a financial business component for credit card underwriting or banking deposit services. Therefore MasterCard serves as a networking processing servicer but they do not have the capability to underwrite credit or offer deposit accounts on their own. This requires them to partner with financial institutions for all card issuance.

Branded Card Benefits

MasterCard partners with financial institutions which determine the benefits a cardholder can receive on their card. They also advertise their card partnerships. To attract different types of consumers, financial institutions offer numerous features on a MasterCard branded card. Some popular features may include no annual fee, rewards points, cashback, and 0% introductory rates. MasterCard partners with the financial institutions issuing cards and therefore may take part in the structuring of the card’s features which are typically outlined a customized business agreement.

Co-Branded Cards

MasterCard is also a leading network processor in co-branded card relationships. In a co-branded card relationship, MasterCard will serve as the network processor in partnership with either the merchant acquiring bank or a third party financial institution chosen by the retailer. If MasterCard is the network processor then they have exclusive rights to processing transmissions if external communication is required for processing of the co-branded card.

Alternative MasterCard Relationships

There is a secured MasterCard card for consumers who are new to credit or repairing bad credit, but there are prepaid MasterCard cards that can be given as gifts or used by consumers who don’t qualify for a credit card or who want the convenience of a MasterCard without going into debt. These cards are popular industry payment cards and are issued in partnership with an issuing financial institution.

Transaction Fees

As a network processing service provider, MasterCard charges network fees for each transaction they process. These fees are a factor for merchants opting to allow MasterCard payment cards. Merchants pay MasterCard a small percentage of each MasterCard transaction. For merchants, this fee is bundled with all of the fees associated with a particular transaction. The merchant, acquiring bank, network processor and card issuer are the four main entities involve in a transaction. Thus, transaction fees for merchants will typically include a network processor fee and merchant acquiring bank transaction fees.

By accepting credit cards, merchants can increase their sales, because consumers like the convenient and safe payment option. Merchants get paid in full for the purchases consumers charge to their MasterCards. These charges are deposited in a merchant account managed by the merchant acquiring bank.