MasterCard Had a Surprisingly Good 2009

With our economy in the worst shape it’s been in since the great depression, it came as a rather pleasant surprise to see that MasterCard did quite well in 2009, relatively speaking of course, thank you very much.

The world’s second largest processor of credit card transactions (Visa is number one) saw a 1% rise in revenues for the first three quarters and posted a 24% increase in operating profits. They accomplished this by raising fees and cutting their marketing costs.

That’s pretty impressive stuff when you figure that consumer spending all but shut down during that time period. And now with the economy showing signs of improvement, the upside for MasterCard is looking pretty darn good.

It is important to note that MasterCard does not issue credit cards like banks and credit unions, but rather acts as a middleman. Like their counterpart Visa,  they collect pennies for processing transactions each and every time one of their branded cards is used.

That means that they do not issue credit themselves and therefore are not affected by defaults and write-offs like banks such as Bank of America, Chase and Capital One are.

In fact, the number of sales using a MasterCard branded card has actually increased during the recession. That is due mainly to their large presence in the debit card industry. More and more consumers prefer to use debit cards now rather than credit for a variety of reasons.

All this makes MasterCard, a publicly traded company, an attractive investment opportunity. It currently has a price to earnings ratio of around 18 times which is well below its historic P/E of 27.

Of course, when all is said and done, the stronger the economy is, the better off MasterCard will be as well.

New Credit Card Regulations Nearly Upon Us

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