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« Previous Entry | Main | Next Entry » Who Owns the Credit Card Companies? Name:
Tim Krueger
Question: Who owns the credit card companies? Once upon a time, Bank of America owned Visa, but I'm not sure if it's been spun off. So, if the stress tests have shown that the banks are not as healthy as they should be, does that mean the credit cards might go under as well? Paul Solman: Visa is a publicly held company as of last year, when its stock was sold in the largest Initial Public Offering in history, after being owned by thousands of institutions, mainly banks. MasterCard Worldwide went public in an IPO in 2006. The Discover Card I shared your question with bank analyst Chris Whalen, who writes: "The card issuers own the brand and the payment network. The card accounts are mostly owned by banks, who extend the credit and own the relationship." So, if cardholders default in large numbers, the banks would be hurt before the credit card companies. However, since credit card accounts were often pooled and sold off by banks to investors as securities, in the same way mortgage-backed securities were -- as CREDIT CARD-backed securities -- it's not clear how badly the banks would be hurt. Depends on the extent to which they securitized. In other words, banks that got rid of their credit card accounts by selling them are obviously a lot fewer than those that held onto them. UPDATE: The ever-zealous readers of this page point out that Morgan Stanley spun off the Discover card in 2007. I was remembering a TV ad spoof I once produced of the firm's merger mania that ended: "Morgan Stanley Dean Witter Discover Microsoft: We measure success -- one sucker at a time." I guess it stuck in my head and my Internet check turned up an anachronistic corroboration. -- Posted May 12, 2009 | Comments (8) | Permalink
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Discover Card is an independent company and not owned by Morgan Stanley. I guess "experts" sometimes miss out on little facts
Check your facts... Discover Card is not owned by Morgan Stanley, they are an independent company and they own Diners Club International and Pulse.
Buffett has 13% of American Express. Ken sits with a hefty number of shares as well. If you look at their relationships, lobby ties and campaign political action committees you'll clearly see why this company couldn't be any more corrupt.
First of all, Morgan Stanley has not owned DFS for more than a year. They are a public company (NYSE: DFS) , as is American Express (NYSE: AXP).
VISA and MasterCard are network co-ops that own the network infrastructure and the brands, but they don't own the accounts. The member banks that issue cards own the accounts and debt, AND own the responsibility for the terms on your account. (i.e. Chase, Capital One, BOA, Wells Fargo, etc.) Amex and Discover have member issuers, but primarily issue their cards. They own most of their accounts and debt, and are responsible for the terms and conditions on your accounts.
Dear Paul -
Suppose I paid off my credit card in full and then gave the credit card company an extra $1,000 so that I had a net balance of negative $1,000. Would the credit card company be obligated to pay me 29.99% interest for holding on to my money? Seems only fair.
I'm a first time reader here, though I've been a fan of Paul Solman for many years, for clear explanations of economics. But I did not understand much of your discussion on credit cards. What is the "payment network"? If I'm furious about the way card interest rates are raised, who should I complain to? This really was not clear. Please, on your site, have less (or no) humor and more basic and complete explanations.
Paul is wrong about Discover Card. Morgan Stanley spun DFS off about 2 years ago. It is a publically owned company. I would expect any person who presents himself as someone who can answer questions about the world of finance would know this well publisized piece of information.
as david pointed out there thives as in it takes a thief to stop them I am going to soon post every social security number with my relic key to every place on the internet with there adreses if that is what it takes to stop them than I will do it.