News

B of A signs discount deal with MasterCard

May 16, 2006

PURCHASE, N.Y. - MasterCard International announced this week a deal with Bank of America to provide pricing discounts on fees as well as other incentives in exchange for higher transaction volumes on MasterCard-branded cards from B of A.

B of A is one of MasterCard's biggest issuers and is the credit card company's third-largest shareholder, holding a 6.23 percent stake, trailing only JPMorgan Chase & Company and Citibank. According to a Security and Exchange Commission filing, the deal allows pricing arrangements for B of A's use of MasterCard's authorization, clearing and settlement services on certain supplemental user-pay services in the United States.

Under the arrangement, MasterCard will provide B of A with an annual incentive, based on certain volumes, and will pay a bonus each year when the targeted volumes are met.

Pricing details of the discount deal were not disclosed.

The deal comes as MasterCard prepares to go public and as B of A toys with the possibility of creating its own payments network, which would be in direct competition with MasterCard and Visa USA. (Read also, B of A chief dissatisfied with bank's Visa focus.) MasterCard plans to raise as much as $2.8 billion in the IPO and is expected to price shares at between $40 and $43.

MasterCard and B of A representatives could not be reached for comment.