Visa and MasterCard operate the two largest international networks on behalf of their members. Both organizations have been subject to legal action and regulatory investigation concerning the extent to which they provide and charge for these services constitutes an anti-competitive practice. They do not issue credit cards as such nor do they manage or finance credit card receivables.
As the industry has developed the number of supplementary features available has increased sharply. This has been accelerated by two factors:
Competition .Issuers are competing with each other for customers. Supplementary features provide them with a way to compete which is not simply based on the annual fee charged or interest rate applicable.
Market segmentation. By providing a number of different branded cards with different pricing structures and features issuers can segment the market more effectively. A basic mass-market card may have a low, or no, annual fee and high interest rate. A premier card may have a high fee, low interest rate and offer many supplementary features.
Examples of supplementary features include the following:
Insurance. A traveler paying for an airline ticket with a particular card automatically receives some form of travel insurance. These policies can provide cover for cancellation, medical expenses, loss of life, lost luggage, travel delays and so on.
Discounts. Suppliers make agreements with issuers to offer discounts to customers paying with a particular card. In return the issuers give the supplier a rebate in the form of free advertising.
Loyalty schemes. “Air Miles” are one of the earliest examples of loyalty schemes. These were originally devised as a means to lock frequent flyers into using a particular airline or group of airlines. Credit card issuers offer the equivalent by offering “points” based on the value of transactions charged on a card. These points may be exchanged for the waiver of any annual fee, a cash rebate, free gifts and other promotional items and in some cases can be transferred to airline frequent flyers programs.
A lower rate credit line. American Express is better known as a charge card operator than as a credit card issuer. In addition to a number of other supplementary features some of these cards are linked to a bank account with a pre-approved overdraft limit and with an interest rate below that charged on most credit cards.